Sunday, March 04, 2018

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

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3/3/2018 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: MSCC
Entry alerts: ARRY; CAMP
Trailing stops: PTCT; AMZN
Stop alerts: IPXL; SCHN

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

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- Stocks sell farther early Friday, reverse in a pre-weekend short covering
move. All but Dow turn positive.
- Too many stories hit the market: tariffs, Japan QE end, Fed rate hikes,
Putin's bomb.
- Perhaps more upside to the new week, but the probabilities still suggest
another drop.
- Still very good leadership groups and stocks, but that does not guarantee
a climb to a new high from here.
- Market is not in a new trend so we stay with less money in the market as
we wait for the next big move and then the next trend.

After breaking higher the prior Friday and Monday, clearing the weeklong
consolidation, stocks sold Tuesday into Friday. Japan's Kuroda rather
unexpectedly musing it might be time to end QEJ (QE Japan). The US
announcing metals tariffs, others vowing retaliation and the US vowing
retaliation to retaliations. Interest rates, the Federal Reserve gone wild
(supposedly), Russia's Putin bragging my missile is bigger than yours. That
makes for a nice, steady market.

As for the tariffs, after the initial round of outrage, Trump said trade
wars were good and boasted they are easy to win. Oh, that is a relief. I
thought this history thing was a problem. Okay, I see it. For decades the
US has let China and others get away with agreements and 'understandings'
that advantaged them and seriously disadvantaged US producers. When they
have a cushy deal for a long time, and you then come in and say 'it is time
to adjust the terms now that you are on your feet and doing well,' they
squeal like stuck pigs. Or more politically, it 'outrages the global
community.' The nerve. You help them out, they prosper, now you want to
move back to an even playing field. 'Foul' they cry. Okay, I guess we
should have just crushed your businesses into pulp when we had the
advantage. Instead we helped you out and now you cannot admit your good
fortune and continue to work hard.

Instead the WTO threatens sanctions, purportedly to even things back out.
The irony, of course, is that the US is simply attempting to move back to a
deal that is for equals now that the other countries have their industries
working well. The WTO and impacted countries, however, react in a manner
that would make the arrangement even further skewed in their favor. You
truly get no good will for acting with good will toward other countries.
You give, they prosper, you then say there is no longer any need to give,
and then you are a villain to be condemned. Again, why then bother to be
nice in the first place? You get nothing for it. Other than, of course,
'death to America.'

Market action.

Three days hard down, Friday the same with futures opening sharply lower and
stocks selling off through the first hour. In that first hour, however,
they found support and started to recovery. A midmorning test lower put in
a higher low and stocks managed to rally to the close.

Short covering? Sure it was. As noted in the pre-market alert, after the
3+ days downside and ahead of the weekend a short covering bounce could
ensue. It did and stocks made that recovery, though not all made it back to

SP500 13.58, 0.51%
NASDAQ 77.31, 1.08%
DJ30 -70.92, -0.29%
SP400 1.10%
RUTX 1.71%
SOX 1.76%
NASDAQ 100 0.90%

VOLUME: NYSE -10%, NASDAQ -8%. Lower trade on the rebound from the selling
sessions, though still above average. At least there were a significant
number buying and covering shorts.

ADVANCE/DECLINE: NYSE 1.7:1, NASDAQ 3:1. Decent breadth. Not as strong as
the downside when the selling started, but stronger than the Thursday
downside breadth.

Thursday I discussed NASDAQ and SOX as being in position to bounce. Okay,
they did, just took them a bit longer. And it was a good bounce as SOX
tested farther to the 50 day MA and then reversed smartly. NASDAQ gapped
below the 50 day MA and then reversed. Those were the two we though had a
shot and they made pretty good runs at it, particularly SOX.

If the market is going to rally again from here it is because of those two,
perhaps you can throw in RUTX as well. The small caps out in another
downside session but held the Thursday low and reversed, holding some key
support levels.

SP500 was so-so, gapping lower then recovering to positive, but lower trade
and not taking back any significant levels. DJ30 similar and it did not
even make it back to positive. SP400 put in a decent move, but it closed
still below important levels.

Can SOX and NASDAQ, and perhaps RUTX, drag the others back up? Their
components certainly showed the kind of firepower Friday that could do it,
but they are not the entire market. NFLX moved to a new high on a strong
breakout with volume. INTC bounced sharply off support. CSCO held
beautifully and bounced. MU strong. They can lead, but they have to show
they can drag the others back with them.

We did close some positions and picked up some. Wish we had not closed AMZN
but we did keep one open so we still have some upside exposure there. If
NFLX continues upside on this breakout, you have to look at adding
positions. Even if the market doesn't follow, NFLX doesn't seem to care.



SOX: Sold into Thursday but bounced off a tap at the 50 day MA. Friday a
gap to the 50 day SMA set up a rebound, taking back all the Thursday loss.
By the way, Thursday's close held the November peak, an important level.
SOX does not look bad, indeed, it looks the best of the group.

NASDAQ: After selling to the 50 day SMA on the Thursday close, NASDAQ
gapped below both 50 day MA. It held 7100, reversed upside. Decent action,
held where it had to, but not the same strength as SOX.

RUTX: Sold again Friday morning, matched the Thursday low, but as on
Thursday, rebounded. This time it did not just hold the October high but
blew past it as well. Nice recovery from a support level, but frankly its
chart is far from providing any upside warm feelings. It sold hard for 2+
sessions and then bounced hard for a session. 1550 is key for it (closed at

SP400: Sold again Friday, but reversed off support at 1840, posting a solid
gain. Nice relief move, but the pattern is not great, has resistance
overhead at 1900 (closed at 1878), and the pattern is overall bearish until
it can make an important upside break.

SP500: Broke lower in the ABCD downside pattern and solid three sessions
and then into Friday before it recovered to a modest gain. Still at
resistance, so this lower volume bounce is suspect indeed. A move to the 50
day MA's on continued lighter trade than the selling sets up the return trip
to the February low.

DJ30: The only index that did not recover to positive Friday. Gapped,
sold, recovered, but came up short just below the December consolidation
resistance. Not looking great as it sold off in its own ABCD downside
pattern. After a short bounce that perhaps mimics DJ30, it likely rolls
back over.


Chips: Again one of the best upside groups, having come from trash to
tolerable. MU, AMAT, QRVO, XLNX, NVDA have workable patterns. LRCX is
still good and MLNX made a quick test and is looking good to move upside.

FAANG: NFLX is the cream of the crop with its new breakout. FB sold to
near the 200 day SMA and is trying to bounce. AAPL held the 50 day SMA and
rebounded, but is still locked in its range. AMZN fell to the 20 day EMA,
bounced on very solid trade. GOOG gapped lower again, but did reversed to
positive; could not recover the 50 day MA's.

Software: RHT, FFIV bounced nicely off test. BLKB, MSFT not bad bounces
either. VMW gapped sharply lower; great. Overall, however, still a good

Metals: No major move Friday, but with their patterns, that is not bad
news. STLD held the 20 day EMA and bounced some in a nice pattern. RS held
its pattern well. SCHN shook us out unfortunately. FCX has now test up an
interesting pattern.

Drugs/Biotech: Still some good patterns and action. IMGN bouncing off the
10 day EMA test. IMMU moving up off a 50 day MA test. PTCT shook us out of
a position but recovered. VCEL moving back upside on volume. ARRY
bouncing. AMGN reversed off its doji, showing big volume.

Financial: Some 50 day MA tests in progress. BAC, JPM tested and started
to bounce. GS still below the 50 day. C bad.

Retail: Some impressive moves, solid holds, and interesting patterns. DDS
explodes higher again. TGT holding decently in a nice developing pattern
over the 50 day MA. TLRD not gad. ROST keeps hanging on for now. HD
gapped to the 78% Fibonacci retracement for what could be a double bottom at
that level. KSS sold to the 50 day MA then reversed sharply upside Friday.
There is good promise here.


Stats: -70.92 points (-0.29%) to close at 24538.06

Stats: +77.31 points (+1.08%) to close at 7257.87
Volume: 2.29B (-8.03%)

Up Volume: 1.66B (+817.87M)
Down Volume: 603.84M (-1.016B)

A/D and Hi/Lo: Advancers led 2.99 to 1
Previous Session: Decliners led 1.42 to 1

New Highs: 64 (+31)
New Lows: 72 (-30)

Stats: +13.58 points (+0.51%) to close at 2691.25
NYSE Volume: 900M (-10.00%)

A/D and Hi/Lo: Advancers led 1.71 to 1
Previous Session: Decliners led 1.5 to 1

New Highs: 27 (+12)
New Lows: 165 (-4)


VIX: 19.59; -2.88
VXN: 21.53; -3.21
VXO: 19.08; -1.36

Put/Call Ratio (CBOE): 1.16; -0.13

Bulls and Bears: The plunge slowed for the bulls, but there is already a
massive drop in place the past three weeks.

Bulls: 48.1 versus 48.5

Bears: 14.4 versus 14.6

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: 48.1 versus 48.5
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: 14.4 versus 14.6
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 versus 20.2


Bonds: 2.868% versus 2.799%. After moving higher on the week and a solid
break higher Thursday, bonds sold back from the 20 day EMA test.

Historical: the last sub-2% rate was in November 2016 (1.867%). 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 2.792% versus 2.713% versus 2.72% versus
2.72% versus 2.66% versus 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: 1.23187 versus 1.22822. Euro bounced after 2 weeks of selling,
moving back over the 50 day MA Friday after a reversal Thursday.

Historical: 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 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

USD/JPY: 105.734 versus 106.03. Dollar sold off Wednesday to Friday,
testing the mid-February low and showing a doji. Perhaps a double bottom?

Historical: 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 versus
108.797 versus 108.88 versus 109.33 versus 109.58 versus 108.651 versus
110.001 versus 109.46 versus 109.50 versus 108.77 versus 108.84 versus
108.601 versus 109.411 versus 109.033 versus 110.159 versus 110.159 versus

Oil: 61.25, +0.26. Oil sold on the week from a lower high, holding at some
support at 60.00, bouncing twice off the low there Thursday and Friday.
Looks weaker, however, likely tries an ABCD setup. That means, however, more
near term weakness.

Gold: 1323.40, +18.20. Gold could not make up its mind on the week, though
it was lower. Sold hard Tuesday and again Thursday, falling through the 50
day MA. Friday a bounce, but it did not change the pattern. Very jumbled
right now as it could not hold an easy 50 day MA test.


A flood of data on the week starting with ISM Services Monday followed by
the jobs data Wednesday, Thursday, and Friday.

Important, may make a difference to the market in the end, but right now
stocks are on a bumpy road that is likely not at its end just yet.

SOX looks better and better, NASDAQ is decent, RUTX is trying. There are
still several leadership groups that still sport very nice patterns.
Promising, but the market started to sell again last week and likely it sees
out the historical pattern. The Friday bounce was no doubt short covering,
and perhaps SOX and NASDAQ can help keep the move upside to start the week.
It did sell from an ABCD downside pattern and it is possible the downdraft
is over.

After a day or two, however, I would not be surprised if the move runs out
of gas and the final test toward the February low is on. The leadership
looks good and it could lead the market higher. What likely happens as the
market sells again to test the prior low, and during that time these stocks
can hold up and be ready for the bounce. Other stocks can use that to work
on their bases. That is the usual scenario.

Friday was interesting, a solid short covering move. The next point of note
is how stocks open Monday. A bounce and we see how it holds, for the day or
more. A bounce can turn into something really solid given how many quality
stocks there are in good patterns, but it has to prove it. For those stocks
that bounce but are lagging, using the move higher to exit is not a bad
strategy. Using the move higher to exit some March options is also not a
bad idea.

New positions? There are patterns that look good still and are moving well.
You cannot ignore NFLX. We can play some of them as they bounce, but as
before, knowing any bounce now is still just likely a relief move.

The probabilities are that the market is not through the selling episode
yet. A bounce could turn to a new high but likely stalls out and then makes
that second drop that usually puts an end to a selloff . . . IF the economy
is still solid, if the Fed is not on the path to wreck it, if war does not
erupt, if the trade issues don't explode.

A few ifs, but for now we play the market that has the most probabilities,
and that is a test to the prior lows. The more immediate question is
whether the market can make more upside than just the Friday move before it
stalls and falls. Again, we want to use the move higher to position better
for the likelihood of a second drop.

The reason is this is a tumultuous time in the market. Trends are in flux
and thus moves are for most stocks shorter term. That is why while we have
positions, we don't have a lot of money in the market right now. Too easy
to get whipsawed. When the break lower occurs, if it does, sure we want to
play that downside short term. Then when a new move starts, if there are
very good patterns to play, that is a time to put more money in. If the
move lower does not come, we play leaders upside, and if more and more join
in and the market breaks out, we put more money to work.

Have a great weekend!


NASDAQ: Closed at 7257.87

7300 from a modest mid-January consolidation
7400 is some price resistance from both sides of the mid-January all-time
7438 is the February lower high
7506 is the January 2018 all-time high

7240, the upper gap point from early February 2018
The 50 day EMA at 7145
6918 - 6980 are price points from November/December 2017
6914 is the late November all-time high
6796 is the early November 2017
6641 is the October high
The 200 day SMA at 6635
6630 is the February 2018 selloff intraday low
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 2691.25

2694 is the mid-December peak
The 50 day EMA at 2713
2744 is the 61% Fibonacci retracement of the selloff
2751 from early January 2018
2762 is the upper gap point from early February
2789 is the February lower high
2808 from the mid-January consolidation. Some support, not that strong.
2850 from a January 2018 gap point
2873 is the January all-time high

2597 is the November 2017 high
2584 is the upper channel line from the March 2009 uptrend channel
The 200 day SMA at 2561
2532 is the February 2018 intraday selloff low
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 24,538

24,835 is the mid-December consolidation range
The 50 day EMA at 25,000
The 61% Fibonacci retracement at 25391
The lower gap point from February at 25,521
25,800 is the February lower high
26,000 from mid-January consolidation
26,439 is a gap point from the January high
January 2018 all-time high 26,617

23,608 is the early November high
23,602 is the early November 2017 high
23,360 is the intraday low form the February selloff
The 200 day SMA at 23,077
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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