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5/19/2018 Investment House Daily
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The REPORT SCHEDULE is as follows:
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.
Access to all current videos will remain assessable each day using the play
links in the reports.
If any market circumstances arise where we see additional plays we want to
prepare for the next session, we will of course issue those plays regardless
of the day of the week.
MARKET SUMMARY
- Chips undermine any attempt for a group move higher.
- Economic data showing improvement, the kind that economists always miss.
- Still watching to see if the large cap and midcap indices can make good on
their good patterns.
- China says it never agreed to reduce the trade deficit $200B, but this
weekend agrees to "substantially reduce" the gap. Okay, given the trade
gap's size, $200B looks 'substantial.' Perhaps this 'deal' helps stocks
Monday.
Overall a week of lateral movement as the indices consolidated the initial,
and thus far only, surge off support. Sure, Tuesday was a hard day for the
large cap indices, but they hung on and worked laterally along the 10 day
EMA.
Of course, there are always exceptions to the general rule. There was
nothing lateral about the RUTX small caps as they tested early then surged
Wednesday and Thursday, taking a breather for a modest gain Friday. A lot
of power from the small caps as they punched out three consecutive new
all-time highs.
The other exception: SOX. It too suffered the Tuesday drop but held and
bounced nicely Wednesday. It looked good to go but then AMAT's weak
guidance undermined the move as it dragged other stocks lower and SOX with
it, gapping downside to a 1.44% Friday loss. Chips are an important group
to the market, and there is a question mark after Friday whether they can
shake off the AMAT impact and perhaps form a right shoulder to a potential
inverted head and shoulders pattern. That will take time, but it will also
show itself if SOX is able to limit the downside in the coming week.
SP500 -7.16, -0.26%
NASDAQ -28.13, -0.38%
DJ30 1.11, 0.00%
SP400 -0.25%
RUTX 0.08%
SOX -1.44%
NASDAQ 100 -0.51%
VOLUME: NYSE +18%, NASDAQ +2%. Upside volume, moving up above average again
for the first time in 7 sessions, as the NYSE indices were not hit hard.
That is not a bad thing given the lateral consolidation. NASDAQ trade still
below average as it tests the 10 day EMA, not bad action at all.
ADVANCE/DECLINE: NYSE +1.1:1, NASDAQ edges just positive. All thanks to the
small caps.
Again it was said trade was a concern with China saying it would never
unilaterally offer to reduce the budget deficit by $200B, Larry Kudlow then
saying China was lying, all the while China dropped its inquiry into claims
the US is dumping sorghum. Lots of words, lots of positioning, but it is
the actions that are ultimately the key. Of course, it does not help that
the US is now bickering with Europe over trade as well. China, Europe,
NAFTA. A trifecta.
Outside of ongoing trade speculation the economic data was not bad. Philly
Fed on Thursday shot past expectations and continuing claims has dropped
like a rock the past year. Retail sales dropped from March levels but the
revisions were to the upside and that means that likely the April readings
will be upwardly revised as well. When you start seeing the upward
revisions, that typically means any slow down is over, that the economists
are still seeing things through their 3-steps behind glasses.
'Ah ha!' the economists all say. THAT is why the RUTX surged to a new
all-time high while the large cap indices, laden with their worries over a
trade conflict, have failed to move. Oh, how silly of me; economists don't
know squat about markets. Heck, 90% of them don't know squat about
economics!
THE MARKET
CHARTS
RUTX: Continued the breakout to higher highs. Strong initial move, 3 days
of pause/test, two new upside sessions to new highs Wednesday and Thursday.
Friday was up but a day off with a modest gain, showing a doji. Broke out,
put in a good move on top of the breakout.
SOX: I said it was hardly the picture of health, and Friday it showed some
issues after AMAT's earnings beat but lowered guidance. Sounded like CAT in
a way. Other chip equipment stocks fell with AMAT, dragging SOX to the 10
day EMA on the close. That puts SOX at the trendline as well. There is the
possibility of forming an inverted head and shoulders with a dip to the 50
day SMA (another 15 points). Possible. SOX is still trending higher, but
it will have to overcome the AMAT pall and forming a right shoulder could do
it.
SP400: An upside week but barely. SP400 had to test to the 10 day EMA
before breaking higher the second half of the week. Tested the prior break
over the April high, moved back up to hold the breakout. Friday was off a
bit. Breakout, tested, now we will see if SP400 can follow RUTX higher
toward the old highs. A long way to go with an interim peak in between to
get to that prior all-time high.
SP500: Holding at the 10 day EMA after dropping to that level on the
Tuesday flop that ended leg one of this latest upside attempt. Friday saw
BA, CAT, DE and others break higher, but they could not budge the needle on
the entire 500 large caps. Still a very good break higher out of the
triangle followed by the current nice tight lateral test. MACD looks good
as noted before. All that is missing is the next upside break.
DJ30: Very tight lateral move over the 10 day EMA Tuesday through Friday
after the drop from Monday that put in a new high on the rally off support.
Breakout from the triangle, a move over the April high, now testing that
move. Nice pattern, but nice patterns are just nice patterns until the next
break is put in. BA broke higher, CAT as well, both components. If AAPL
can throw in as well, that perhaps will help spring the move.
NASDAQ: Broke over the April high the prior week, held it Monday, but then
dropped Tuesday to the 10 day EMA and that prior peak. Worked laterally,
tried to make the break Wednesday, but didn't stick and NASDAQ closed the
week at the 10 day. As with the other large cap indices, it is in position
to move higher, just needs to show the move.
LEADERSHIP
Oil: Oils stocks enjoyed the lead, as a group, for the week. HAL, SLB,
PTEN, NBR, SPN and others had great weeks if not great Fridays. WHD had a
great week regardless of the day. We were able to bank some nice gain on
the week with several of our positions.
Drugs/biotechs: After a quiet 2+ weeks of consolidation, some good breaks
higher toward the end of the week. IMMU, ECYT gapped and gave us nice gains
to bank. ARWR is still solid in its upside move. Still waiting for BIIB to
make a break higher form a well-formed pattern. VCEL climbing the 10 day.
BLUE, as volatile as ever, is in the process of what looks to be a big move
starting.
China stocks: Volatile as well but mostly upside. BABA is in a 2 week
lateral move. BZUN exploded higher Thursday to a new high, kept it going
Friday. HTHT enjoyed a huge week, frontend loaded. ATHM took a breather
after a good break higher. YY started higher. SOHU could not advance its
Monday break higher. BITA is interesting. BIDU was clocked Friday, gapping
sharply lower to the 50 day EMA after a strong upside move.
Software: After a week of testing, many are starting to bounce back, e.g.
NOW, DATA. ULTI tested for a week and if it can get some volume we are
interested on a new move. UIS still looks good, still has not moved. CRM
testing the 20 day EMA. RHT testing the 50 day MA, started to bounce
Friday, not bad volume. Still a very solid sector.
Big Names: AAPL still in the 10 day EMA test of its break higher from its
range. FB testing its break higher with a 10 day EMA lateral move. GOOG
gapped to the 50 day MA on word of a story coming out about it losing the AI
battle with AMZN. NVDA fell to the 20 day EMA Tuesday and is attempting a
rebound. INTC fell to the 20 day EMA Friday, struggling as did most chips.
Still a nice uptrend. MSFT in a nice 20 day EMA test.
MARKET STATS
DJ30
Stats: +1.11 points (0.00%) to close at 24715.09
Nasdaq
Stats: -28.13 points (-0.38%) to close at 7354.34
Volume: 1.95B (+1.56%)
Up Volume: 909.89M (+37.87M)
Down Volume: 1B (+23.7M)
A/D and Hi/Lo: Decliners led 1.01 to 1
Previous Session: Advancers led 1.54 to 1
New Highs: 148 (-24)
New Lows: 42 (-9)
S&P
Stats: -7.16 points (-0.26%) to close at 2712.97
NYSE Volume: 872M (+17.54%)
A/D and Hi/Lo: Advancers led 1.06 to 1
Previous Session: Advancers led 1.18 to 1
New Highs: 112 (-37)
New Lows: 72 (+19)
SENTIMENT
VIX: 13.42; -0.01
VXN: 16.87; -0.32
VXO: 13.31; +0.33
Put/Call Ratio (CBOE): 1.03; +0.20
Bulls and Bears:
After dropping similar to a stone from 65+ to the 40's, bulls rebounded 3.5
points, somewhat upper mid-level. Big move to a higher high, big drop, now
can stocks find enough contrary view to make a break higher?
Bulls: 46.6 versus 43.1
Bears: 19.4 versus 20.6
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: 46.6 versus 43.1
43.1 versus 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: 19.4 versus 20.6
20.6 versus 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
OTHER MARKETS
Bonds: 3.06% versus 3.123%. Bonds bounced some Friday after breaking below
the April and February levels, but the main point is yields held over 3.0%
Historical: the last sub-2% rate was in November 2016 (1.867%). 3.123%
versus 3.096% versus 3.069% versus 2.997% versus 2.97% versus 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: 1.17714 versus 1.1802. After rebounding to the 10 day EMA into
Monday, the euro crashed lower Tuesday and continued to a lower selloff low
Friday.
Historical: 1.1802 versus 1.1811 versus 1.18272 versus 1.19358 versus
1.19411 versus 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: 110.76 versus 110.935. Dollar broke out over the 200 day SMA
Thursday, paused Friday. This was the next key level.
Historical: 110.935 versus 110.376 versus 110.246 versus 109.693 versus
109.384 versus 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
105.946
Oil: 71.37, -0.12. Oil was off Friday and sluggish on the week, but it
continued its climb up the 10 day EMA.
Gold: 1291.30, +1.90. Plunged below the 200 day SMA Tuesday, holding the
same level through Friday.
MONDAY
The indices were unable to make a break higher Friday even though some
stocks jumped upside, e.g. BA. Chips were a drag, pure and simple. Other
groups were up, but not enough to offset the negatives and boost a new break
higher. Thus, the stock indices enter next week with SP500, DJ30, NASDAQ,
SP400 in good patterns but still looking for the next break higher, RUTX
likely ready to test its upside surge, and SOX trying to find out where it
wants to try and make a stand.
Now if trade is truly an issue, and it is to a certain extent, there may be
some positives to start the week. China and the US met and it is reported
that China agrees to boost US export purchases to "substantially reduce" the
trade gap. Is $200B a 'substantial reduction?' Was Larry Kudlow right in
calling China a liar and did China make claims it knew were untrue (I guess
that means it lied . . .)?
Well, given you know China likes to be able to save face, it would appear
that its readiness to agree to "substantially reduce" the trade gap but not
say it agreed to $200B in reductions is just that: face-saving semantics.
Perhaps this 'deal' will boost stocks. Perhaps there is still a lot of
weekend ahead. There is also the chip stocks. Can the market rally without
them? Yes, but it is not as easy. Good patterns remain in many areas and
we will see if they can continue breaking higher. They need to in order to
offset those groups struggling, e.g. fast food (SONC, JACK, YUM) and some
not-so-fast food (RRGB, TXRH).
In the end it comes down to leaders and whether they can make good on good
patterns. Many are and we banked some nice gain the past week. More will
have to make the moves to push SP500, DJ30, NASDAQ, SP400 higher out of
their bases. It is May, it is already hot outside, and the market has to
deal with the time of year issue (sell in May and go away . . .). For now,
if the stocks make the moves, we will play the stocks.
Have a great weekend!
End part 1
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