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7/21/2018 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
- Expiration 'fireworks' not about the market, but about the President.
- Market initially overcomes Trump on China trade, Trump on the Fed, but
slides on his lawyer's tape discussing a Playboy model payoff.
- High to low action, but a very quiet expiration.
- Large cap indices set up to move higher and with copious amounts of
earnings results coming, the will have the ammo if they want to move.
- Finding plays not just ahead of earnings is a bit challenging right now,
but some non-tech areas do look promising for the first time in a long time.
Stocks started mixed, but with the uptrend they found bids and rallied
positive, cruising into midmorning.
This despite Trump telling Joe Kernen China was a currency manipulator,
undermining the gains in the US. As a result, Trump stated he was 'ready to
go' on $500B of tariffs that would cover all Chinese goods.
Trump also had a beef with the Fed, stating Powell was a good man, but
raising rates at this juncture when the US was making good progress was only
driving up the dollar and making debt service costlier.
Oh my did the media go berserk. I had to change the channel away from CNBC
even sooner than usual, moving over to a fairly liberal Bloomberg that was,
by comparison, much tamer, much more attached to reality than the CNBC
non-Kernen anchors. The female CNBC 'news anchor' was beside herself
calling the President's positions 'crazy,' also noting that the President
wanted to CONTROL other agencies, giving the attorney general as an example.
Well, of all the nerve, the President wanting to control an agency that is
under the Executive Branch, i.e. an agency CONTROLLED by the President. The
result of our schools forgoing teaching our children what the Constitution
actually says even with respect to the very basic, three-branch governmental
system, is showing. It was so bad that even some of the liberal guests
(e.g. Jared Bernstein, former VP Biden's economic advisor) had to chime in
and say the President's comments were just not that bad.
I know, I know, this sounds like a personal problem, but it is really a
problem for everyone. News reporting that is passing itself off as unbiased
but always taking the same side on every story, pursuing only one line of
questioning. Failure of our education system to instill in our children the
most basic understanding of why we are the country we are and how we formed
and what truths we hold dear. Thus, we end up electing a socialist in New
York who wants the federal government to oust private ownership of companies
in favor of government control. A person who does not understand that the
unemployment rate does not move lower because someone has two jobs instead
of one. We are creating incredibly ignorant young adults, and equally
ignorant young adults are electing them to office. My son fumes when I say
such things, but he is well-versed in US history and economic history and is
in the incredibly small minority of his peers who understand economic cause
and effect.
The point: the market didn't care about Trump's tweets. China is
manipulating its currency lower, despite the condition and its pledge upon
joining the WTO that it would not, and it appears investors are taking this
as a sign China is losing the trade war, a war that really has not yet
started, that Trump has not yet begun to fight.
But, I digress.
Then at midmorning, another story hit. Was it the Fed Chair resigning after
Trump's tweets? No. A conflict erupting in the South China Sea? No. A
political assassination by the Russians and no doubt personally ordered by
Putin? No. Bill Clinton grope and sexually harass another woman? No! The
NYT reported TRUMP, having paid a Playboy model claiming to have had an
affair with Trump, was the one abusing women. Apparently there is a tape
that Trump's lawyer made in a discussion between Cohen and Trump where this
was discussed, a tape that was part of the items picked up in the FBI's raid
of Cohen's office. How this is not attorney-client privilege and EVER got
out from the wholly unbiased, apolitical, justice-seeking, of highest
probity FBI is a complete mystery. As you can see, once again, the laws of
the US are no longer applied equally.
Stocks peaked for the day on this news and started a gradual downtrend into
the Friday close.
SP500 -2.66, -0.09%
NASDAQ -5.10, -0.07%
DJ30 -6.38, -0.03%
SP400 -0.53%
RUTX -0.26%
SOX -0.49%
NASDAQ 100 -0.03%
VOLUME: NYSE +12%, NASDAQ -4%. NYSE trade moved above average, NASDAQ
remained below average and actually fell. Expiration Friday so higher
volume on NYSE was nothing special. Lower volume on NASDAQ was rather
surprising.
ADVANCE/DECLINE: NYSE -1.1:1, NASDAQ -1.1:1. Rather boring expiration.
All of the July expiration 'fireworks' had nothing to do with stocks.
Charlie 'the blabbermouth' Gasparino on FoxBusiness, panting and drooling
with excitement, openly mused this was perhaps just a teaser.
Perhaps, but this is nothing new for Trump, is it? Same kind of allegations
(or more) during the campaign. And it mattered . . . not. Everyone knew
Trump was no Boy Scout. Those that voted for him were tired of the same
old, same old, and knew Trump was not a best buddy. I heard one woman say
he was a pig, but she was not voting for pastor but for someone who would
change the business as usual DC crapola. Thus, I would be surprised if this
has ANY impact on Trump over a week from now. His policies are popular with
his voters and with many independents, and they seem to realize the flaws,
the 'pig-like' actions are part of the package. They don't care, they voted
to put a new sheriff into DC town, someone like Wyatt Earp to be hard-nosed
and clean things up.
I don't mean to make this sound like some kind of gushing over Trump. It is
not. I am distilling what I have heard from several republican friends
about their support for Trump even if these kind of things are revealed.
Hey, the democrats still loved Bill Clinton for doing the same or worse, so
I can at least understand the sentiment.
The question for us is whether this means much other than a fade from the
highs on one expiration Friday. Doubt it. If tape after tape after tape
emerges painting Trump as a beast, then yes it has impact. Other than that,
the Friday fade back to flat by the indices is likely about all those Trump
haters will get out of this, at least in terms of the market action.
So, after that somewhat digression I have to say that the market action
Friday, while disappointing, was not a reversal. It was a damn boring
session, but not a reversal. Sometimes boring can be good as when stocks or
indices are working on bases. The quiet lets them go about their business,
and then things get noisy when the post a breakout move.
Of course the action Friday left the indices unchanged. After good moves
Thursday, promising moves toward the prior highs, SP400 and RUTX faded, RUTX
part of the move, SP400 all of its move. Not reversals, but leaving SP400
and RUTX still below the key prior peaks.
NASDAQ, SP500 and DJ30 lost some ground but that is fine. They all rallied
higher the past two weeks or more and needed a break. They are taking that
break with very modest fades. SP500 and DJ30 look exceptionally good on
this test, and given the patterns we anticipate a turn back upside in the
not too distant future.
Earnings season is here with dozens reporting next week. We are still
looking at playing some pre-earnings moves, but the primary interest for new
positions is the counterpunching after the earnings release and the stock
shows its break. These results could help break DJ30 and SP500 back to
their upside moves. BA, UTX are setting up well and announces results, an
important industrial stock. CELG announces and it has also put in a good
pattern as have many large biotechs. AMZN, AMGN, INTC announce Thursday.
Plenty of important earnings are ahead this week, earnings that could power
the large cap indices higher.
THE MARKET
CHARTS
DJ30: The Dow is in a 2-day fade after almost 3 weeks upside that
approached but didn't really threaten the early June peak. The banks and
some industrials perked up the past week, fading back to end the week,
setting up the same as the Dow. DJ30 looks set up very well to continue
higher, and some earnings this week could be the driver.
SP500: SP500 broke through the June and March highs and is now testing as
well, fading Thursday and Friday, waiting for the 10 day EMA to catch up.
Set up well, waiting on earnings.
NASDAQ: Rallied to a new high early week then slid laterally into Friday.
NASDAQ big names continue to push upside. The big change was the demise of
NFLX and its near-term trend. Gapped lower on earnings, recovered off the
lows but then stalled out. Other big names are in modest pullbacks similar
to DJ30 stocks, i.e. fading Thursday and Friday to test near support. MSFT
reported strong results, INTC is set to release results in the coming week.
NASDAQ continues in its uptrend.
SP400: Showed promise Thursday with a break higher to match the early July
peak. Faded Friday. Made a shallow test after the prior July high, is
rebounding as it needed to do, but it has not made the new breakout yet.
Critical for SP400 to make that move.
RUTX: As noted Thursday, RUTX' pattern is not as solid as SP400 with the
twin peaks. It tested the 20 day EMA off that second peak and has rebounded
Tuesday to Thursday, putting in a strong move Thursday. Friday it stalled,
fading just modestly. RUTX may bounce around here for a few sessions, but
it needs to make the breakout.
SOX: Trying to make a move off the 200 day SMA stick, SOX moved higher but
struggled after reaching the 50 day SMA. Looks as if it will put in a
higher low over the 50 day EMA and continue the break higher. INTC's
earnings will have something to do with that.
LEADERSHIP
FAANG: NFLX changed character on the week with its earnings miss. FB
continued its slow climb up the 10 day EMA. It announces results this week.
AMZN rallied to a new high, faded late week but is in very good position as
are many of the big name market leaders. GOOG is the same, surging early in
the week then fading to test the 10 day EMA. Very good positioning. AAPL
remains the forgotten stock of the group, in a 2 week tight lateral range.
Software: Some members of the group struggled, e.g. VMW, FFIV. Others
added to moves though slowed late week: DATA, ADBE; VRSN, TTWO. MSFT
announced solid results, gapped higher, faded much of the move. Good
earnings setting the stage.
Financial: Banks picked it back up Friday after a Thursday loss. JPM, BAC
up on strong volume. C looks good. V and MA put up modest Friday numbers
but look very good with V heading into earnings the coming week.
Industrials: BA tested more, setting up well ahead of earnings. UTX is
putting in an excellent test ahead of its results. HON exploded higher
Friday on huge trade with excellent earnings. TEX in a weeklong test back
to the 200 day SMA.
Energy: Down week for the group with oil falling as well. Many are testing
key support after 1 to 2 weeks of testing. APC ended at the 50 day MA, a
support it has used often. EOG showing a doji over the 50 day MA's, ESV at
that level as well. GPOR testing the 200 day. DO didn't make it; Friday it
broke sharply lower below the 50 day MA.
Drugs/Biotechs: MYGN broke higher again on the week. CELG, AMGN look very
good in pullbacks testing moves, earnings ahead this week. AGN solid in a
200 day SMA test. JNJ gapped upside Tuesday, could not hold and filled the
gap back at the 50 day MA. It could make its move upside as well.
Retail: Good week, sloppy finish Friday. ROST, TJX, FOSL all look good,
struggled Friday. RH, solid looking, needs to bounce. M broke higher
nicely, paused Friday.
Chips: As with many other areas, some very good setups heading into
earnings, e.g. TXN, SLAB. TSM powered higher to the 200 day SMA on its
earnings. Others were hit -- the story of the group, i.e. very bifurcated.
QRVO sold hard, SWKS dumped on its results.
MARKET STATS
DJ30
Stats: -6.38 points (-0.03%) to close at 25058.12
Nasdaq
Stats: -5.10 points (-0.07%) to close at 7820.20
Volume: 1.78B (-4.3%)
Up Volume: 721.95M (-111.22M)
Down Volume: 1.03B (+30M)
A/D and Hi/Lo: Decliners led 1.11 to 1
Previous Session: Advancers led 1.17 to 1
New Highs: 130 (+12)
New Lows: 39 (-7)
S&P
Stats: -2.66 points (-0.09%) to close at 2801.83
NYSE Volume: 816.81M (+11.48%)
A/D and Hi/Lo: Decliners led 1.13 to 1
Previous Session: Advancers led 1.49 to 1
New Highs: 90 (+9)
New Lows: 32 (-8)
SENTIMENT
VIX: 12.86; -0.01
VXN: 17.11; -0.24
VXO: 11.41; +0.05
Put/Call Ratio (CBOE): 0.98; +0.08
Bulls and Bears:
Bulls popped back up like a cork from 47.1 after the rise and drop. Got
overdone to the downside as everyone turned negative just as the market
bounced. Now is it too high? Not really. It was over 60 recently; a bit of
room but not much.
Bulls: 55.3 versus 52.4
Bears: 18.5 versus 18.5
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: 55.3 versus 52.4
52.4 versus 47.1 versus 47.6 versus 52.0 versus 55.5 versus 52.9 versus 50.0
versus 49.1 versus 46.6 versus 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
Bears: 18.5 versus 18.5
18.5 versus 18.6 versus 18.4 versus 17.6 versus 17.8 versus 17.7 versus 19.2
versus 19.2 versus 19.4 versus 19.4 versus 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: 2.895% versus 2.838%. Yields surged as bonds crashed. Trump
lamented the Fed's rate hikes and to many that only cemented another hike in
September as the Fed would have to show its 'independence.' Certainly
looked as if the market was heading that way.
Historical: the last sub-2% rate was in November 2016 (1.867%). 22.838%
versus 2.88% versus 2.86% versus 2.856% versus 2.829% versus 2.849% versus
2.853% versus 2.867% versus 2.867% versus 2.824% versus 2.835% versus 2.833%
versus 2.871% versus 2.86% versus 2.84% versus 2.833% versus 2.877% versus
2.882% versus 2.895% versus 2.899% versus 2.937% versus 2.889% versus 2.915%
versus 2.922% versus 2.933% versus 2.977% versus 2.963% versus 2.952% versus
2.948% versus 2.928% versus 2.974% versus 2.935% versus 2.944% versus 2.902%
versus 2.86% versus 2.857% versus 2.79% versus 2.931% versus 2.992% versus
2.982% versus 3.063% versus 3.056% versus 3.06% versus 3.123% versus 3.096%
versus 3.069%
EUR/USD: 1.17214 versus 1.1651. Euro jumped back up on the Trump comments.
Historical: 1.1651 versus 1.16514 versus 1.16603 versus 1.1709 versus 1.1685
versus 1.16608 versus 1.1672 versus 1.17288 versus 1.17578 versus 1.17439
versus 1.1689 versus 1.1665 versus 1.16388 versus 1.1638 versus 1.15634
versus 1.15602 versus 1.16517 versus 1.17031 versus 1.16572 versus 1.16072
versus 1.15762 versus 1.1586 versus 1.15746 versus 1.2624 versus 1.16245
versus 1.15678 versus 1.17973 versus 1.17454 versus 1.17761 versus 1.17737
versus 1.17987 versus 1.1774 versus 1.1762 versus 1.1697 versus 1.166 versus
1.16993 versus 1.16643 versus 1.15446 versus 1.17148 versus 1.17096 versus
1.17022 versus 1.17826 versus 1.1786 versus 1.17714 versus 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
USD/JPY: 111.451 versus 112.732. Dollar dropped hard against the yen as
well.
Historical: 112.732 versus 112.783 versus 112.896 versus 112.337 versus
112.631 versus 112.093 versus 110.911 versus 110.973 versus 110.474 versus
110.666 versus 110.40 versus 110.854 versus 110.687 versus 110.523 versus
110.223 versus 110.097 versus 109.678 versus 109.980 versus 109.895 versus
110.376 versus 110.03 versus 109.783 versus 110.668 versus 110.578 versus
110.247 versus 110.381 versus 110.314 versus 109.466 versus 109.705 versus
110.164 versus 109.878 versus 109.90 versus 109.53 versus 108.767
Oil: 68.26, +0.51. A tough prior week, then oil bounced back to the 50 day
MA into Friday. Still not a great pattern.
Gold: 1231.10, +7.10. With all the turmoil, gold shot higher. That still
leaves it in the downtrend, rebounding but just toward the 10 day EMA.
MONDAY
Large cap indices set up well. Small and midcaps near the old highs in a
very important test of those. Earnings are queued up, ready to drive the
action.
Will the earnings provide a catalyst? Most are good with good guidance.
There are some guidance misses and warnings, however, and some analysts are
talking around this being the near term peak in results. No doubt weak
guidance from big names dampens enthusiasm.
As discussed Thursday, this earnings season we are a bit reluctant to ride
too many through earnings or take on new positions with the intention of
holding then through the results. Typically that is not our favorite play
and with some guidance issues it becomes even less so. Picking good entries
after earnings is the preferred method as the skeletons are out of the
closet. Banks are an example. JNJ has filled the earnings gap higher.
Looking for those as vehicles to use when SP500, DJ30 and NASDAQ bounce from
these nice little tests.
Have a great weekend!
End part 1
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