Sunday, April 29, 2018

The Daily, Part 1 of 3, 4-29-18

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4/28/2018 Investment House Daily
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- Once again, market cannot make much of a much anticipated, strong earnings
- NASDAQ gaps higher, up over 115 points, gives it all back.
- Decently bullish stock index patterns remain, but thus far any upside
upside is used to sell, undermining the patterns.
- Good patterns in many stocks and sectors are failing to provide breakouts,
or if they do, many are quickly lost.
- Money does appear still working into some areas and thus there are
potential upside entries as money reallocates
- Some sectors still look good but with some distribution, can the patterns

Friday was not a washout, but it was more evidence that the market is having
a hard time coming up with buyers willing to sustain a move higher.

Earnings season has given buyers every reason to buy stocks as results for
the vast majority of stocks have handily topped expectations, and in many
cases, crushing expectations. Yet, the stock indices, while not rolling
over and in some cases still in very decent patterns, cannot sustain an
upside move.

Friday was the most recent case in point. AMZN utterly crushed
expectations. MSFT and INTC both also laughed at their expectations.
Before that it was FB, GOOG, and NFLX. Bada bing, bada boom. Or for the
more cerebral as the NFL announcers, with unintentional hilarity, use to
describe football players, ipso facto. The indices should be surging. Yet,
the indices, down heading into earnings and in prime position to move upside
on great results, have not.

Stocks gapped higher Friday, particularly on NASDAQ as its futures showed a
115+ point opening gain. DJ30, SP500, not so much. Not nearly so. Yet,
they posted some good early moves as well. The move was all on the open,
however. Stocks gapped then sagged into midmorning. NASDAQ swung 115
points high to low, needing to come back to close with a 1.12 point gain.
AMZN lost well over half its early gain by the time it closed. It may rule
retail but it cannot control the markets. Not yet.

SP500 2.97, 0.11%
NASDAQ 1.12, 0.02%
DJ30 -11.15, -0.05%
SP400 -0.16%
RUTX -0.11%
SOX -0.80%
NASDAQ 100 0.10%

VOLUME: NYSE -12%, NASDAQ -4%. At least volume was lower on the reversal
off opening highs. Not a turkey shoot at the stocks that moved higher.
Volume still remains weak overall and mixed in terms of rising volume on up
sessions versus rising volume on down sessions.

ADVANCE/DECLINE: NYSE 1.4:1, NASDAQ 1.1:1. Not the breadth of champions,
but of course with the rollover in the index, a weak A/D line is not

No, it was no rollover in and of itself, but it was another in a series of
failed attempts to move higher. There is a pattern of selling into
strength, of breakouts getting pushed back without much upside other than
the day of the breakout, taking down even good moves.

The indices still have relatively decent upside patterns with NASDAQ, SP500,
DJ30 sporting what are arguably triangles forming over key support levels.
Triangles can be positive, can be negative. The key is the index ranges are
narrowing over the past 1.5 months and forming 'points' to the triangles,
and that typically indicates a more serious directional move is coming. In
other words, they are going to break upside or downside. The inability to
utilize good news that one would think SHOULD have yielded upside has not
done so. Indeed, when the news does result in a break higher, as noted
above, the breaks have been turned back on the indices and of course in many
individual stocks as well.

Some areas still look quite good, e.g. oil, but that is arguably for an
entirely different reason than other stocks would rally on. In any event,
money is moving toward oil and it looks as if it is also still interested in
drugs and healthcare.

Other areas are deceptive. Some good patterns are still out there for sure,
but this market has been taking down good areas. Sectors with good looking
patterns just fail to move and then get taken lower. Others that rallied
well and then slipped into pattern building also look good but then get
taken out. Thus, things are a bit deceptive and you find yourself looking
at retail, software and wondering if they are going to break higher from
their consolidations or break lower as others have.

The pattern of giving up breaks higher is not an indication of market
health. Patterns that set up but then cannot breakout and break apart show
changing expectations by the big money: they were being accumulated but then
the money turned off and indeed left.

That is an indication of a market that is distributing, i.e. is a net seller
of stocks as the big money sells on rallies, bounces, good news moves. That
could lead to potentially bullish triangle patterns in the indices to simply
fail to make breaks higher, and indeed break lower.

Why would they do that if the economy still looks solid as Q1 GDP showed
Friday (2.4% vs 1.8% expected vs 2.9% Q4)? Could be the Fed rate hikes and
rising interest rates. Perhaps a yield curve inversion in bonds? The
timing is not that great for the market: late April and often the overall
market turns sluggish and choppy over summer and into the early fall. 'Sell
in May . . .' right?

Sure there will be groups that perform just as always. Oil seems solid,
healthcare/drugs are so far so good as they come back around, and software
is still solid but somewhat worrisome as many tech related groups get sold
off in favor of the very core items such as the commodities, e.g. oil.

Summary: That prognosis is not all that great for the market, but then
again, it is what it is. Patterns are still quite solid enough and that
could turn indecision or selling into buying at some point. Thus far,
however, the solid earnings have failed to do that. Fed hikes, possible
yield curve inversion. Couple those with the still threatened trade wars
and there is reason backward looking earnings are not driving stocks higher.

It is just a gut feeling, but one based upon watching breakouts get thrown
back and good news fail to elicit sustained new moves, at the least the
market continues to work laterally in a trading range. At worst this action
that has the look of accumulation but is also showing distribution ends up
undermining the index and leadership patterns to where they drop over the
summer. You cannot emphasize enough the inability to move higher and hold
moves when Q1 earnings were so solid as an indication of the big money being
indifferent or at worst for the bulls, being actively selling.

Thus, we will continue looking upside in those areas that are receiving
money, that are under accumulation, e.g. oil, drugs/healthcare. In
addition, we nose around for stocks we feel are setting up to fall. After a
move higher with some hope on earnings, and some rebounds on results that
bounced a stock but then dissipates, we can get some good downside. FB
comes to mind as does AAPL, AMAT and others.

Perhaps at some point the bounce that holds will come, but not sure what the
catalyst would be outside of new trade deals with China, Canada, Mexico.
That likely does not happen anytime soon and is thus out there hanging on
the horizon. There is also the worry, though not often voiced, of what
happens if the democrats return to the majority in Congress and the
political turmoil (on top of the current political turmoil of course) that
would result.

What I really think is dogging the market are interest rates. Not really
higher 10 year yields but the possibility of an inverted yield curve.
Historically that is an accurate indicator of economic health and of course
the market reacts to that well ahead of the appearance of economic issues.
Thus the struggles in the market at maintaining breaks higher suggests
preparation for downside to come.



The Thursday bounce move tried to add to the bounce Friday, but a strong
NASDAQ move failed to ignite buying elsewhere, and in the end the indices
faded. Still not bad overall patterns for the large cap indices as they
narrow their ranges, but they are still not yet reacting well to what
appears to be good news. The small and midcap indices are in patterns that
look bullish enough, and they are showing good action in their stocks, they
just have to make good on the patterns. That has been the problem for this
market: making good on the patterns.

NASDAQ: Gapped upside to the 50 day SMA then closed basically flat.
Thursday NASDAQ gapped up off a doji at its trendline from early 2016 and
looked to extend that Friday, but the move was sold. Still banging around
in the lower half of its channel so has room to move, but even with some
good large cap NASDAQ earnings the past two weeks it is still hard-pressed
to put together a sustained break higher. Two weeks upside from early April
was sold off aggressively into last Tuesday. It did not break down, but
even with some very good NASDAQ large cap earnings it has failed to climb
back up in its channel. It is acting heavy, but there are many large cap
NASDAQ stocks that have not broken down and many smaller NASDAQ stocks
working quite well. Thus, the index for now continues the 2016 trend but is

SP500: The SP500 high to low move Friday was not nearly as epic as NASDAQ.
SP500 was down pre-market for quite some time before flipping positive.
Small move, low volume, no big deal. It continues narrowing its pattern the
past month, trying to set up a triangle over the 200 day SMA to deliver some
upside. It certainly can do that, but it has also experienced the same
failure to hold moves as NASDAQ, though perhaps on a less grand scale.

DJ30: See SP500. Basically a bullish pattern though intraday of late
unable to hold gains. Using the 200 day SMA as support, DJ30 is trying for
a higher low and a anew break higher.

SOX: Gapped sharply higher Friday, continuing the Thursday upside gap off
the 200 day SMA. Then it reversed and closed lower with a downside
engulfing pattern that can be an issue for the upside. Head and shoulders
pattern overall, very near the neckline in the right shoulder. Trying to
break higher off the 200 day support to break that pattern up, but the
Friday move was not encouraging.

RUTX: The small caps clearly helped lead the way higher from April's start.
After the January peak it has traded in a range that has formed something of
a large 3+ month pennant. Perhaps the small caps put in a higher low at the
50 day MA's a the midpoint of the pennant and rally for a breakout.
Important group of course given the economic implications.

SP400: A pair of tight doji at the 50 day MA's as the midcap index also
puts in a 3+ month pattern also using the 200 day SMA as support. Not bad
at all, and it could be that the midcaps and small caps again lead the
market, getting money that is pulled from the large cap areas.


Stats: -11.15 points (-0.05%) to close at 24311.19

Stats: +1.12 points (+0.02%) to close at 7119.80
Volume: 2.04B (-3.77%)

Up Volume: 921.11M (-548.89M)
Down Volume: 1.1B (+474.26M)

A/D and Hi/Lo: Advancers led 1.05 to 1
Previous Session: Advancers led 1.6 to 1

New Highs: 59 (-6)
New Lows: 54 (-8)

Stats: +2.97 points (+0.11%) to close at 2669.91
NYSE Volume: 724.2M (-12.30%)

A/D and Hi/Lo: Advancers led 1.35 to 1
Previous Session: Advancers led 2.04 to 1

New Highs: 64 (+4)
New Lows: 48 (-28)

Bulls and Bears:

Bulls bounced back 4.5 points after a precipitous decline. They are falling
hard, bouncing with quick sharp bounces, then falling again. Very similar to
the stock market action. Bears were lower but they are holding the bounce
higher into the 19's.

Bulls: 48.0 versus 43.6

Bears: 19.6 versus 19.8

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: 48.0 versus 43.6
43.6 versus 42.2 versus 49.5 versus 55.5 versus 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: 19.6 versus 19.8
19.8 versus 18.6 versus 17.5 versus 16.8 versus 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 versus 20.2


Bonds: 2.959% versus 2.975%. Bonds rallied back for a second session,
making it to the 10 day EMA and near the 50 day SMA. Possible double bottom
using the February and April lows. Thus far a decent move, more a relief

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.975%
versus 3.0245% versus 3.00% versus 2.962% versus 2.96% versus 2.914% versus
2.867% versus 2.83% versus 2.829 versus 2.825% versus 2.781% versus 2.801%
versus 2.805% versus 2.775% versus 2.812% versus 2.806% versus 2.781% versus
2.739% versus 2.714% versus 2.781% versus 2.775% versus 2.854% versus 2.813%
versus 2.814% versus 2.881% versus 2.90% versus 2.852%

EUR/USD: 1.21291 versus 1.21788. Big drop down to the 200 day SMA on the
low, followed by a reversal upside for a nice doji with tail. Euro may have
hit a near term bottom after 7 sessions lower that broke it down from its 3+
month lateral range.

Historical: 1.21788 versus 1.2163 versus 1.22232 versus 1.22094 versus
1.22876 versus 1.23464 versus 1.23748 versus 1.23712 versus 1.238532 versus
1.23313 versus 1.23299 versus 1.23720 versus 1.2359 versus 1.2311 versus
1.22812 versus 1.2247 versus 1.2285 versus 1.22698 versus 1.23073 versus
1.23234 versus 1.2406 versus 1.24494 versus 1.2351 versus 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

USD/JPY: 109.051 versus 109.28. Dollar rallied through Wednesday, then
spent Thursday and Friday moving laterally, waiting for the 10 day EMA to
catch up to the nice break higher.

Historical: 109.28 versus 109.373 versus 108.894 versus 108.728 versus
107.645 versus 107.404 versus 107.409 versus 107.027 versus 107.010 versus
107.362 versus 107.267 versus 106.882 versus 106.873 versus 107.09 versus
107.16 versus 106.939 versus 107.11 versus 106.816 versus 106.797 versus
105.901 versus 106.286 versus 106.81 versus 105.397 versus 105.473 versus
104.789 versus 104.829 versus 105.892 versus 106.478 versus 105.945 versus

Oil: 68.10, -0.09. Oil is working laterally at the 10 day EMA,
consolidating the break higher and the new recovery high.

Gold: 1323.40, +5.50. Gold rebounded some of the losses on the week that
saw it break lower through the 50 day MA to start. Closing in on the bottom
of its 4 month range.

End part 1
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