Saturday, May 12, 2018

The Daily, Part 1 of 3, 5-12-18

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5/12/2018 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: WHD
Entry alerts: PTN; TSCO
Trailing stops: None issued
Stop alerts: XON

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- Rally takes a pause Friday after a solid week showing decent internals,
good enough leadership.
- Stock indices clear initial resistance, set for a short test.
- Earnings remain good enough but not exploding stocks higher.

On Friday, after 5 or 6 days of upside, the market rested. Nice moves off
support by all the indices with RUTX already bumping at the all-time highs.
Makes sense that they took a breather after the nice break higher, with some
decent volume as well, ahead of the weekend.

SP500 4.65, 0.17%
NASDAQ -2.09, -0.03%
DJ30 91.64, 0.37%
SP400 0.06%
RUTX 0.19%
SOX -0.75%
NASDAQ 100 0.16%



The week continued the rally and put a stronger stamp on the bounce that
started two Thursdays back with the doji reversal off support on all the
indices. Good volume on a key break higher as the indices broke through
near resistance. SP500, DJ30, SP400 cleared the upper trendline in their
triangles/downward wedges. NASDAQ, RUTX cleared the April highs with RUTX
rallying to the prior all-time highs. Not huge volume all the way up, but
strong volume on the breaks through resistance. That works.

Leadership is solid enough. Not many huge moves on the session as many that
led the break higher took a day off. Others, however, jumped. Retail posted
excellent gains. HD broke free from the handle. TSCO did the same with a
2.68% gain. FOSL surged on the week with a big breakout. BBY jumped
Friday. Nice. China stocks had a great week, e.g. ATHM, BIDU, while others
posted decent Friday moves, e.g. BIDU, HTHT. Software was strong again if
not on Friday.

So, a bounce higher on the indices off support, good volume on the break
through resistance, more than enough volume. Not the strongest move ever,
but compared to what the market showed before, a rather impressive week.

Friday was a rest day. Likely there is more testing early next week, and
that is good. A couple more days off would be normal, and then the market
shows if it can make good on that break of resistance. Thus far the move
looks solid, and we will be looking to move in to more positions, some that
gapped away from us this week, after they test the initial move.



RUTX: The small cap leadership continued through the week, and Thursday and
Friday RUTX bumped against the March and January highs. After 6 sessions
upside and a 66 point move to that resistance, a pause would be normal.
Looking for a flag test to form and then RUTX can take on the prior highs.

SP500: Broke over the April high as well as the upper trendline to the
triangle on the week, pausing for a rest Friday. Good initial move off the
200 day SMA and the bottom of the triangle, breaking through the upper
trendline. Now a pause after 6 days off the support and that should set
SP500 for a renewed move higher.

NASDAQ: A strong move on the week as well, coming off the lower trendline
from 2016, clearing the mid-April high. Actually showed above average
volume on the Wednesday break past the April peak. Friday was a day off on
lower trade. As with the other indices, a test for a couple more days puts
in a 1-2-3 test and it is ready for a new upside leg in this move.

DJ30: Broke through the 50 day MA's and the upper trendline to the downward
wedge Wednesday, and continued upside through Friday. Volume was no great
shakes, but DJ30 moved through the mid-April peak, taking out the next
important resistance. Not a hugely powerful move, but breaking some
resistance, following the other indices.

SP400: Doji Friday after breaking higher the prior Friday and rallying
through Thursday. Cleared the 50 day MA's, the upper trendline to the
triangle, and the April peak long the way. Not as powerful as RUTX, but
knocking down the resistance as it finds it.

SOX: Took Friday off after breaking through the 50 day MA Thursday in a
6-session rally. That pushed SOX to the mid-April high and back in the old
channel from late 2017 into 2018. Recovered, but not much of a pattern.


Chips: Hard to call this a leadership group right now as there are not that
many pushing to higher highs, but it is an important group and so worth a
look. MU moved up to the 50 day SMA late week, but still no volume. LRCX
is not bad given an inverted head and shoulders/ABCD pattern. AVGO is in a
trading range. QRVO is pausing after a 2-week move straight up. VSH is
testing a nice break higher. Some good moves, but again, not a huge area of

China: Solid moves last week with some taking a pause Friday, e.g. BABA,
BZUN, WUBA. ATHM surged then rested Friday. BIDU, HTHT added some more
upside through Friday. Solid group.

FAANG: A week that saw some FAANG stocks renew. GOOG was one with a solid
surge on the week though flattish Friday. FB surged nicely on the week.
AAPL was off Friday but a steady rise on the week. AMZN is over the 10 day
EMA but very sluggish. NFLX is the same way, easing to test the 10 day EMA.

Oil stocks: Mostly an upside week as stocks started moving higher out of
patterns or continued moves, but it was back and forth each session and the
gains were still overall modest. SLB gapped out of its handle, but could go
no farther. HAL still in the lateral move. ESV enjoyed a strong week.
PTEN up slowly along the 10 day EMA. NBR stuck in a lateral move. Offshore
drillers were off Friday, but broke higher on the week, e.g. RIG, DO.

Retail: Well, Thursday I called the group unremarkable, then Friday there
were some good breaks. HD, TSCO jumped for us. BBY started breaking
higher. Nice. RH testing late week. COST, ROST not bad but still stuck in
a lateral range.

Healthcare: The Trump healthcare proposals gave these stocks a rush Friday.
We will see if they can sustain the momentum. ESRX, UNH, DVA, BIIB look


Stats: -2.09 points (-0.03%) to close at 7402.88
Volume: 2.08B (-3.55%)

Up Volume: 925.67M (-604.33M)
Down Volume: 1.12B (+445.26M)

A/D and Hi/Lo: Advancers led 1.19 to 1
Previous Session: Advancers led 1.58 to 1

New Highs: 151 (-25)
New Lows: 49 (+7)

Stats: +4.65 points (+0.17%) to close at 2727.72
NYSE Volume: 709.964M (-7.65%)

A/D and Hi/Lo: Advancers led 1.24 to 1
Previous Session: Advancers led 2.54 to 1

New Highs: 118 (-21)
New Lows: 27 (-4)


VIX: 12.65; -0.58
VXN: 16.19; -0.19
VXO: 12.57; -0.64

Put/Call Ratio (CBOE): 0.98; +0.17

Bulls and Bears:

Of COURSE bulls fell the past two weeks as the market started to rebound.
That is how this works, i.e. an inverse relationship.

Bulls: 43.1 versus 43.6 versus 48.0

Bears: 20.6 versus 20.8 versus 19.6 versus 19.6

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: 43.1 versus 43.6
43.6 versus 48.0 versus 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: 20.6 versus 20.8
20.8 versus 19.6 versus 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: 2.97% versus 2.966%. Closed over 3% Wednesday, but faded. Bouncing
back and forth the past two weeks just below the 50 day MA, and looks,
frankly, as if TLT wants to break higher. Does not make sense in terms of a
strengthening economy when rates should rise and bond prices should fall.
Nonetheless the bond market has the look it might try to break higher, and
that is a market against a new breakout in the stock market if indeed bonds
do break higher.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.966%
versus 3.006% versus 2.952% versus 2.948% versus 2.968% versus 2.954% versus
2.959% versus 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: 1.19411 versus 1.1913. After 3 weeks of a steep decline, the euro
recovered some ground Wednesday to Friday, though could only manage a bounce
to the 10 day EMA.

Historical: 1.1913 versus 1.18533 versus 1.18672 versus 1.19150 versus
1.19619 versus 1.1983 versus 1.1978 versus 1.19896 versus 1.20741 versus
1.21291 versus 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

USD/JPY: 109.384 versus 109.40. After a rally into May, the dollar is
working laterally below the 200 day SMA. It looks to be consolidating the
move higher to set up for a run at the 200 day.

Historical: 109.40 versus 109.746 versus 109.038 versus 109.022 versus
109.08 versus 109.175 versus 109.628 versus 109.91 versus 109.354 versus
109.051 versus 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: 70.70, -0.66. Faded Friday after a week of continued upside along the
10 day EMA.

Gold: 1320.70, -1.60. Gold held the 200 day SMA the past 2 weeks, bounced
sharply Thursday. Friday a modest loss but gold is holding support and
setting up a bounce upside.


The stock indices made good on the reversals off support, moving through
near resistance last week with RUTX indeed already bumping at the prior
all-time highs. The pause Friday was logical as previously noted, and a
couple of days rest would work to rejuvenate the move and help it continue.

There was some better volume and some better breadth while leadership is
relatively solid. Thus we anticipate more upside and look to pick up more
solid plays as they present themselves.

As is usually the case with good moves, you cannot enter all the positions
you wanted. They either creep higher on low trade or they gap and rally
away from you. Or they don't move at all. The cool thing about continuing
moves is you get a second chance at those when they test the initial break.

Thus, after a bit more rest to start the week, when stocks resume the move
we want to let the current positions ride and then when new stocks break
higher, as long as the internals remain improved, pick up new positions.

Have a great weekend!

End part 1
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