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7/7/2018 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
- NASDAQ, SP500 get off the cusp, join RUTX with significant moves.
- Jobs report drive the action? Trade? No.
- Trade and FOMC are still a problem for the market.
- Wages a problem? Not a problem? The Fed IS a problem.
- Some key stocks break higher Friday, others are in position to follow.
This past week some significant moves were made. Thursday RUTX made the
clean break from the 50 day EMA. SP400 started following that session,
really stepping out more Friday. SP500 finally showed some pop as well,
jumping from an 8-session lateral consolidation and importantly topping the
May peak. Chips were up, DJ30 as well, but they did not make very
significant breaks higher. More work to be done for those, but as with
SP500, at least they have a road map to follow, i.e. the moves of the other
indices.
Leadership was not bad either. FAANG stocks shows some serious action. FB
to a new all-time closing high despite the continual reports on privacy
issues. GOOG rallied nicely off the 50 day EMA test. NFLX broke higher on
solid volume from a 1.5 week consolidation. AMZN is still in that same
consolidation. AAPL as well. Perhaps the latter two will follow the other
FAANG leads as we would like SOX and DJ30 to do as well.
FAANG was not the only game in town. Drugs/biotechs, energy, software, some
key chips (e.g. AMD), TWTR, some metals, some materials (TREX) -- not
garbage. Hey, someone had to be pushing the indices higher. Good to see
there was some quality there; oh sure, it was not the industrial machinery
or JPM (though the latter were higher), but these were solid stocks.
SP500 23.21, 0.85%
NASDAQ 101.96, 1.34%
DJ30 99.74, 0.41%
SP400 0.76%
RUTX 0.87%
SOX 1.22%
NASDAQ 100 1.50%
VOLUME: NYSE -18%, NASDAQ -1%. Okay, no volume blowout, but it was Friday
on a holiday week. Stocks such as NFLX, FB, TWTR moved higher on quite
solid volume for a low volume session.
ADVANCE/DECLINE: NYSE 2.9:1, NASDAQ 2.3:1. Not blowing away the downside
breadth shown on the worst selling, but not meaningless upside.
So was it the Jobs Report described as 'Goldilocks' by CNBC? Trade issues
improving? They didn't hurt, but they were not definitive.
Remember this: the moves Thursday and Friday were significant. Low volume
for sure and thus less impressive perhaps, but significant. That said,
there will still be ebb and flow from the issues of the day: trade
negotiations and the yield curve (aka the Fed).
NEWS/ECONOMY
Jobs Report: Good enough, but not great.
The doom/negative websites said to watch out for a jobs miss. The overly
bullish said expect huge. It was neither. It was not bad. It was more of the
same, i.e. an improving, decent jobs market but not producing wage growth.
Non-farm jobs: 213K vs 195K exp vs 244K prior (from 223K)
Unemployment Rate: 4.0% vs 3.8% expected vs 3.8% prior.
The increase resulted from more people entering the workforce looking for
jobs. This is, finally, a more normal reaction. Amazing isn't it how all
through the past 'recovery' nothing acted normal yet everyone said it was a
recovery. It wasn't. Now that we are having a recovery you see the numbers
reaction as they always do: more jobs and higher quality jobs are available,
those without jobs take heart and go looking for work. More people look
than can find jobs in a month and thus the unemployment rate rises. More
people reentering the workforce, not all of the new lookers find jobs,
unemployment rate rises. That is normal. That is healthy.
Wages: 0.2% vs 0.3% exp vs 0.3% prior. 2.7% year/year. Not rising as fast
as the other elements of the report. This is seen as a positive, i.e. the
Fed won't be compelled to hike rates as rapidly if wages are not rising and
'pushing' inflation as the Phillips Curve, Keynesian BS calls it. Wages
never, ever, in the history of the world, caused inflation. Wages rise out
of need for quality workers. The Fed fears that extra money will be pushed
into the market and if no more goods are made, then more money chases the
same amount of goods, the definition of inflation.
Problem is, as former Dallas Fed president McTeer noted, when the economy is
working such that wages would rise, supply rises and alleviates any demand
bottlenecks. The only thing that interrupts supply meeting demand? When
the Fed truncates money supply to the supply side and thus inhibits its
ability to meet demand. Thus, ironically and indeed tragically for the
average citizens involved, the Fed acts to prevent inflation, but the
actions it takes -- based on an 'indicator' that does not indicate what the
Fed thinks it does -- CAUSES the inflation as the supply of money to the
supply side is choked off.
Brilliant! The Fed never, ever understands this because it relies on a
model that worked only for 6 months in the entire economic history of the
world if it worked that long. It resorts to the standard Federal Reserve
Playbook Manual and takes steps that cause what it fears. Reminds me of the
movie 'Diehard' when the safe cracker says it will take a miracle to get
past the last lock. The FBI shows up and does the one thing that would let
them get past the last lock. The leader Hans proclaims to the safe cracker,
'You asked for a miracle? I give you the FBI.'
Looking at the yield curve flattening and the Fed hiking into that
flattening one has to wonder if the Fed should be in charge of anything
other than making sure there is enough security for the US gold stores.
Hell, the Fed is not even qualified for that. There should be a Fed, but
its ONLY duty should be to provide emergency liquidity when deemed necessary
and that should be automatically limited in time. Oh well. Trump won't
take on this project for now.
Workweek: 34.5 vs 34.5 exp vs 34.5 prior
U6: 7.8%. Rick Santelli at CNBC says this is the real unemployment rate.
When you factor in the 95Mish people out of the work force, I would hazard
it is MUCH higher, at least in real terms such as people who could work but
don't because they don't want to and don't have to because they can receive
benefits and live better than they did in the country they came from -- and
that includes people born in the US who have more disposable income taking
benefits than a person making close to $70K/year. See why there just might
be a problem?
Participation rate: 62.9% vs 62.7%.
More people coming back into the labor force, trying to weed down that 95.9M
people out of the workforce and get them into productive roles once again
versus reading the want ads, bed rest, and the other absurd things that
allowed them to collect unemployment or disability or some other 'aid.'
Where the Jobs Are:
Manufacturing +36K
Professional/Business: +50K
Healthcare: 25K
Construction 13K
Mining 5K
Retail -22K
Trade: US/China exchange $34B in trade tariff gifts on Friday. Trump
threatens billions, indeed hundreds of billions more. People wail and moan
and gnash their teeth. Changing the status quo can be trying, but do you
not do something that is right because it is difficult. I recall a
President saying we do these things not because they are easy, but because
they are hard. That problem with US leaders for the past 30 years is they
took the easy way out.
Trade Deficit:
Over past 3 months the deficit is down the most in 10 years. Currently the
read is the lowest since 10/2016. Seems to be going the way the President
wants it. We will see if that turns out to be a good thing.
Trade Tactics:
I continue hearing our feckless elected congressional officials cry about
the tactics used against our allies and non-allies regarding trade. They
want a kinder, gentler approach. We have HAD a kinder, gentler approach for
decades. That worked quite well -- for our 'allies.' They and our
non-allies (enemies?) have pantsed us. They don't care; they have a good
deal. So, do you continue to do what clearly has nil impact or do you
finally demand they change and if not, reap some of the pain we have to
endure? Our congressional leaders are, as stated, feckless. And imbeciles.
THE MARKET
CHARTS
RUTX: Finished the 50 day EMA test Monday with the reach lower and rebound
to positive, then extended that move each session. The definitive move was
Thursday as the market came back from the holiday. Friday RUTX extended
that move upside toward the prior high. Breakout, rally, test, new break
higher to a new high, then testing late June to key support. Now on an
impressive rebound.
SP400: Started higher Thursday, not as impressive as RUTX, but a solid move
upside. Friday was a more definitive move. Closing in on the prior high
(2008.97; closed at 1989.49) with a 50 day MA test and bounce.
NASDAQ: A significant move here as well though not until Friday. NASDAQ
broke from its 8 session lateral move over the 50 day MA. Not huge trade
but a key group of large cap techs along with small cap drugs posted solid
moves. NASDAQ closed at the early June interim high and the March high. Of
course it needs to keep powering upside to a new high.
SP500: Rallied out of its 8-session 50 day MA lateral move as well. Not
closing in on a new high, just the early June peak that was still below the
March lower high and well off the late January high at 2870. Okay, lots to
do still without any help from the financial stocks. That makes SP500's
attempt higher difficult, but it is holding where it has to and is at least
following.
DJ30: Works for now, but definitely a follower with its financial and
industrial components hurting it. Its drug components are helping, but even
with that help all DJ30 could do Friday was move back up through the 200 day
SMA.
SOX: Two days up off the 200 day SMA, similar to the move in early May.
Just has not made as much of the move, closing just below the 50 day MA's.
Some big names helped, e.g. AMD, TXN, but many were up but mostly a rebound
from selling to resistance.
LEADERSHIP
FAANG: FB new high. NFLX starting higher out of a 1.5 week consolidation.
GOOG rebounding past the recent recovery high. Decent. AAPL, AMZN still in
the same 1.5 week consolidation. NFLX moving toward earnings, FB as well.
Software: UIS found its stride. TTWO moved to a new recovery high. GLUU
started up off its 3 week lateral consolidation. VRSN continues working
higher though on low trade. Ditto DATA, but not losing sleep over that.
Even MSFT broke higher off the 50 day MA.
Chips: AMD posted a powerful move for us. NVDA is trying to come back from
below 450 day MA oblivion. 252 is a key level for it buy the way. QRVO
took Friday off but surged back Thursday. MXIM posted a nice late-week
recovery as well. SLAB looking frisky. MU, AMAT and others looking for
help.
Drugs/Biotechs: Some stocks coming up off tests while others try to turn
away from downtrends. ACAD trying to break higher. BIIB exploding upside
with a gap on strong alzheimer's drug results. CELG moving up through the
50 day MA. ARWR keeps moving higher for us. Have some new additions for
this coming week.
Energy/Oil: Still look good, still looking for a good move. APC held a 20
day EMA test. APA trending nicely up the 10 day EMA. MRO, COP still basing
in solid patterns. CXO breaking higher. Other possibilities as well, e.g.
WDC, EOG.
Retail: Some bouncing such as COST moving off the 20 day EMA. Ditto ROST.
Still waiting for RH to move higher.
Financials: Posted gains Friday, but gains with not a lot of meaning. WFC
looks as if it might actually attempt a break higher through the 200 day
SMA. BAC and JPM could do this as well, but they are not an imminent threat
to move through that resistance anytime soon. C can bounce as well. Sure
it can; anything can bounce for a bit. C does look, however, as if it has
done its time and put in something of a near term bottom.
MARKET STATS
DJ30
Stats: +99.74 points (+0.41%) to close at 24456.48
Nasdaq
Stats: +101.96 points (+1.34%) to close at 7688.39
Volume: 1.72B (-1.15%)
Up Volume: 1.35B (+60M)
Down Volume: 349.68M (-86.22M)
A/D and Hi/Lo: Advancers led 2.32 to 1
Previous Session: Advancers led 2.4 to 1
New Highs: 129 (+43)
New Lows: 21 (-16)
S&P
Stats: +23.21 points (+0.85%) to close at 2759.82
NYSE Volume: 664.553M (-17.67%)
A/D and Hi/Lo: Advancers led 2.87 to 1
Previous Session: Advancers led 2.81 to 1
New Highs: 138 (+60)
New Lows: 30 (-7)
SENTIMENT
VIX: 13.37; -1.60
VXN: 18.72; -1.63
VXO: 12.71; -2.25
Put/Call Ratio (CBOE): 1.00; +0.09
Bulls and Bears:
As noted last week with the sharp drop in bullish sentiment over the prior
two weeks, the sharp drop weighed for a move back up. Looks as if that move
started.
Bulls: 47.6 versus 52.0
Bears: 18.4 versus 17.6
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: 47.6 versus 52.0
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 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: 18.4 versus 17.6
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: 2.824% versus 2.835%. Bumped up into the 200 day SMA the prior week,
tested, then moved through the 200 day SMA Thursday and gapped upside
Friday. Bonds rallying as the Fed says it is hawkish. Goodness.
Historical: the last sub-2% rate was in November 2016 (1.867%). 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% 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%
EUR/USD: 1.17439 versus 1.1689. Euro breaking higher despite the jobs
report, despite a hawkish Fed. Coming off a double bottom, moving up
through the 50 day MA, so there is some technical foundation here.
Historical: 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: 110.474 versus 110.666. Dollar off Friday but just testing a break
back up through the 200 day SMA and measuring a run at the May high.
Historical: 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 versus 108.699 versus 108.699 versus 109.385 versus 109.667 versus
109.502 versus 110.833 versus 110.95 versus 110.76 versus 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
Oil: 73.80, +0.86. Testing the higher high with a 4-day lateral move. 10
day EMA has now caught up to it.
Gold: 1255.80, -3.00. Bounced up to the 10 day EMA Tuesday and Thursday,
stalled Friday with a doji. Key initial bounce. Fails here, chronic
weakness.
MONDAY
Ah, a full week. The market will show if the moves I deemed significant
from Thursday and Friday (even with low volume) will hold the move.
Substantive leadership helped drive the move, leaders from the prior rally.
RUTX broke higher first with SP400 and NASDAQ following. That gives the
move some credence. Now the move has to show staying power.
Building on the significance of the 'significant move' call, we are looking
at adding positions if the new plays and existing plays make significant
moves. We will also let existing positions continue to work, some
rebounding from the prior selling, others from our recent entry points.
Earnings are just ahead, indeed already starting, and stocks, after a
selloff, are stirring higher ahead of results. That may give us some nice
gains to take before individual announcements, and with the pullback there
could still be good upside even on the results announcement. We will see
how that plays out, but for now we are looking to enter more plays as they
continue making significant moves.
Have a great weekend!
End part 1
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