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9/1/2018 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
- Stocks rally to new highs midweek, test modestly into Friday.
- Canada/US fail to reach trade agreement but will go at it again starting
Wednesday.
- NASDAQ near the upper channel line, SOX as well.
- NASDAQ leaders may test soon, but others in NASDAQ and in more industrial
areas are close if not already there on tests.
The week saw new highs or higher highs through Wednesday on all the indices
followed by a modest test to end the week and the month. That leaves the
indices set up quite well for a new upside move to start the new month.
SP500 0.39, 0.01%
NASDAQ 21.18, 0.26%
DJ30 -22.10, -0.09%
SP400 0.26%
RUTX 0.48%
SOX 0.58%
NASDAQ 100 0.16%
VOLUME: NYSE +35%, NASDAQ -6%. NYSE trade surged above average for the
first time since 7/31. NASDAQ trade fell to just below average.
ADVANCE/DECLINE: NYSE +1.2:1, NASDAQ +1.6:1
Oh yes, the new month. September. The month most associated with losses.
Well, in 2017 SP500 rallied 48 points (1.9%), NASDAQ 1%. Didn't tear the
cover off the ball thanks to a late month dip, but hardly living up to
September's unsavory reputation.
Of course, whenever the market rallies for as long as this one has and is
punching out new highs, the worry is about market tops. Not without reason.
The economy is strong with 4.2% Q2 GDP and the Atlanta Fed calling for 4.6%
this quarter. Yet, the recent data has softened. I believe it is just a
soft spot in the expansion, but of course the doom websites and authors are
saying we are at a 2000 and 2007 type of top.
Some headlines today from those sites:
'The decoupling has never been greater'
'Once the bubbles pop, we're all broke'
Typical daily headlines. What most people do not know and what is bandied
about by the global elite -- and even discussed by some great true
economists such as Milton Friedman -- is the ultimate fix, the ultimate
reset button, if it becomes necessary.
The worry is not the current and pending aggregate debt on the books of the
world's countries, but the layer upon layer of tied derivative debt in the
form of derivatives, credit default swaps (insurance on insurance), etc.
Trillions upon trillions of dollars of debt and insurance tied to one
another. If it breaks, the tidal wave of cascading debt could throw
civilization into chaos.
Thus, the kill switch, the reset button, is a global cancellation of debt.
All debt. One time, get out of jail, start over from zero balance.
Everybody; it would not be acceptable to the proletariat (that is you and
me, anyone not in the power broker elite) if only the elites were allowed to
reset. They might try, they might say if they are not saved no one will
survive, but they did that in the financial crisis and it won't happen again
because now the poor slobs are onto it.
Anyway, I hate to sound as if there is no need to worry because the ultimate
bailout is there. To the contrary, it would be frightening, ugly, and
involve a lot of suffering before it was done, but even free market greats
are for it if necessary. Why? Because Friedman and others realize that the
problems are caused not by the free market but by the interference into the
markets that are the genesis of this kind of layered insurance, etc. to
protect positions. Government involvement always exacerbates a problem by
factors of tens.
More to the point for the current day, however, is the FOMC and its interest
rate policy. Thus far it is not showing any desire to slow its rate hiking.
Bullard voiced some concern, stating the Fed should stay put the rest of the
year, but the minutes and Powell himself said the economy is strong and that
hikes will continue as planned. The Fed has paid some lip service to the
yield curve, but you hear comments from the administration (Mnuchin) stating
the yield curve is not an economic indicator but a market indicator. Well,
a yield curve inversion invariably precedes a market turnover, and the
market turnover typically predicts an economic slowdown to come.
Thus, FOMC overplaying its hand remains a worry for the market's future.
For now, the market is not pricing it in. Indeed, some are saying the
recent highs show the market is pricing in the cessation of the FOMC's rate
hiking.
Well, I am simply not smart enough to say that is the case. What I can say
is the market shows good leadership with some prior leaders coming back
after some damage in late July, joining other sectors that started to rise
when they started to fall. That kind of rotation is market healthy.
With the moves to new highs the past week, many of our plays were hitting
our close to target levels. We banked some solid gain on AAPL, AMZN, SQ, V,
VRSN, GRUB, ROKU, etc., etc. After the current test of the move to higher
highs we will see if some of these same stocks as well as others present new
upside entries for the next move upside.
NEWS/ECONOMY
Trade dominated headlines again, Friday whether Canada would join the
US/Mexico deal. 'Off the record' comments from the President were released
and Canada was reportedly outraged regarding the President's lack of respect
for the Canadians. Could be that has to do with its PM and his prior
comments about the President.
Whatever. The end result was no deal Friday. Canadian sources reported no
deal and that the talks were over. That news killed an attempted move
higher by US stocks following a softer open. Then the US reported that the
talks had concluded for the day without a deal but would resume on
Wednesday. Okay, not so harsh. Stocks did manage a very respectable
recovery in the last two hours.
China trade: China continues to make personal attacks on Trump, the sure
sign it has no substantive reasons it should maintain the fiction it is an
emerging economy and thus entitled to emerging economy preferential
treatment. China an emerging economy? That is the same as Heddy Lamar --
That's Hedley -- in 'Blazing Saddles' attempting to pass himself off as a
student to receive a discount to the movies.
In any event, China said that Trump's tweets are "from some alternative
universe." What universe is that? Where the world's number 2 GDP country
considers itself an emerging economy? Is this how China justifies stealing
other countries' IP? I have to laugh. China is so proud of how smart it is,
yet much of the tech it has is tech it stole either through espionage in
terms of government tech (weapons, etc.) or from its 'partnerships' in terms
of company IP. So smart, so advanced, but it feels it must get ahead by
stealing from others. Where is the pride in that? Where is the face saving
in that? There is none. China is full of BS, it knows it, and thus the
personal attacks because it has no argument to counter the question why do
you consider yourself still an emerging economy in need of assistance? I
would LOVE to ask them that question and then press them on it.
THE MARKET
CHARTS
NASDAQ: Just over two weeks upside off the 50 day MA with a series of new
highs from the prior Friday to the intraday high Thursday. Friday NASDAQ
was still up thanks to AAPL, AMZN, MSFT and company. Slowing the move
higher as it does its imitation of a pause after a solid surge higher
starting with the Monday gap higher. Near the upper channel line (8180,
closed at 8110) and that appears to be exerting some influence, slowing the
move and starting something of a consolidation.
RUTX: One of the best performers Friday, not slowing but accelerating to a
new high after a sluggish Tuesday to Thursday. Always love to see the small
caps as upside trendsetters.
SP400 and SP500 are very similar, breaking to new highs on the week then
testing back Thursday and Friday. Holding the breakouts, nice modest tests
to near the 10 day EMA, setting up the next move higher.
DJ30: Similar to SP500 though DJ30 has not hit a new high on the move
though it is hitting higher rally highs. Still remains just over 100 points
off the January all-time high.
SOX: SOX ran into the upper trendline of its 6 month triangle on the Monday
high then spent the rest of the week bumping at it. Didn't drop away, just
hanging in below the TL. Best action would be a drop to near the 50 day MA,
a higher low, then a surge back upside for the breakout.
LEADERSHIP
FAANG: AAPL, AMZN carried the load on the week, each continuing upside even
into Friday. FB was up but not ripping higher. NFLX is trying to break
through the 50 day SMA in something of a cup with handle. GOOG looked great
and started the move higher after a test, but then Friday dropped hard
through the 20 day EMA.
Software: Solid on the week, most taking a breather late week. FFIV
continued its rally into Wednesday then tested modestly. VRSN, ADBE ditto.
VMW looks as if it is ready to break higher. RHT may be through its issues
after that June gap lower. NOW off a bit to end the week after a strong
surge into Wednesday. DATA solid, moving back to the late July high. MSFT
a new high on the week.
Semiconductors: NVDA posted a strong week of recovery; a test back this
week gives a potential entry point. XLNX tested late week after an
excellent move higher. AMD in a nice test of its surge. LSCC moved well
Friday after a good early week surge. Still waiting for AAOI, SIMO to move.
One we were watching, SMTC did so, surging almost 10 points Thursday-Friday.
Drugs/Healthcare: A quiet week after those good runs to end July and into
mid-August. MRK in a 2 week test. PFE a 2 week test to the 20 day EMA.
BMY also in a lateral test. LLY in a flat lateral move as well. SRPT
started upside Wednesday could not continue it to Friday but looks quite
good.
Financial: Still in the test after an upside move Monday. JPM, BAC, C all
testing after that move. V put in a new high on the week, ending with a
pair of doji. GS up Monday, off Tuesday to Friday, giving up the move A
step forward, a step backward.
Industrials: A few moved well, e.g. HON into midweek then a modest test to
Friday. EMR held up well, added some Friday. ETN rallied, tested well into
Friday. These look good. CMI so-so, holding the 50 day EMA. CAT still
working on its pattern.
Retail: Overall solid with some good moves, some others not so great. TJX
posting a nice run higher through Friday with a new high. COST surged
Friday out of a consolidation. ROST holding up well and TGT holding its gap
and consolidation. WSM tested back to the upper gap point and started
higher Friday. WMT still looks good in its pullback to test its earnings
gap.
Transports: AAL moved higher early week then slid laterally in a tight
range; still looks good. CSX in rails tested back to the 20 day EMA on the
week. ODFL (trucking) surged Wednesday, flopped to the 50 day MA Friday,
then recovered decently.
Misc: SQ put in an outstanding week, may need a breather after 2+ weeks
upside. PYPL broke higher as well, tested at the end of the week. DIS
still going nowhere. ROKU surged early week, gapped lower Wednesday on an
AMZN threat, holding near the 10 day EMA.
MARKET STATS
DJ30
Stats: -22.10 points (-0.09%) to close at 25964.82
Nasdaq
Stats: +21.17 points (+0.26%) to close at 8109.54
Volume: 1.9B (-5.47%)
Up Volume: 1.21B (+438.09M)
Down Volume: 662.27M (-547.73M)
A/D and Hi/Lo: Advancers led 1.61 to 1
Previous Session: Decliners led 1.36 to 1
New Highs: 142 (+7)
New Lows: 29 (-15)
S&P
Stats: +0.39 points (+0.01%) to close at 2901.52
NYSE Volume: 830.912M (+35.44%)
A/D and Hi/Lo: Advancers led 1.16 to 1
Previous Session: Decliners led 1.8 to 1
New Highs: 94 (-20)
New Lows: 46 (-16)
SENTIMENT
VIX: 12.86; -0.67. Still range bound and that is fine. The only thing
really to fear is if VIX rises as the market rises, not the case now.
VXN: 16.04; +0.02
VXO: 11.16; -0.52
Put/Call Ratio (CBOE): 1.03; +0.21
Bulls and Bears:
Bulls rallied again, effectively at the 60 level associated with pullbacks.
Bears are elevated but still quite low. At this level of bulls it is time
to start watching how the leaders perform. Thus far they are fine.
Bulls: 59.6 versus 57.7
Bears: 18.3 versus 18.3
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: 59.6 versus 57.7
57.7 versus 57.3 versus 54.9 versus 54.5 versus 54.9 versus 55.3 versus 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: 18.3 versus 18.3
18.3 versus 18.6 versus 18.8 versus 18.6 versus 18.5 versus 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: 2.86% versus 2.857%. Gapped below the 200 day SMA Tuesday as bonds
sold, yields rose. Friday gapped over the 200 day SMA but then gave it up
and lost ground. Back to the 50 day SMA where it held after the gap lower.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.857%
versus 2.882% versus 2.882% versus 2.846% versus 2.813% versus 2.828% versus
2.821% versus 2.819% versus 2.819% versus 2.864% versus 2.871% versus 2.879%
versus 2.882% versus 2.873% versus 2.928% versus 2.963% versus 2.977% versus
2.977% versus 2.945% versus 2.95% versus 2.986% versus 3.005% versus 2.962%
versus 2.975% versus 2.958% versus 2.982% versus 2.965%
EUR/USD: 1.16029 versus 1.1664. Dollar rallied back Thursday and Friday,
driving the pair down to the 50 day MA after a 3 week run higher.
Historical: 1.1664 versus 1.17035 versus 1.1691 versus 1.16802 versus
1.16216 versus 1.15390 versus 1.15709 versus 1.158 versus 1.1487 versus
1.1437 versus 1.13765 versus 1.13731 versus 1.13479 versus 1.14052 versus
1.1413 versus 1.1526 versus 1.16186 versus 1.16001 versus 1.15572 versus
1.15683 versus 1.15864 versus 1.1662 versus 1.1689 versus 1.17074 versus
1.16558 versus 1.17324 versus 1.17385 versus 1.16846 versus 1.16989 versus
1.17214 versus 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
USD/JPY: 111.082 versus 110.962. Still in the range around the 50 day MA.
Tried to break higher Wednesday then sold off Thursday. Friday sold below
the 50 day MA then reversed for a modest gain. Still range bound.
Historical: 110.962 versus 111.734 versus 111.19 versus 111.081 versus
111.249 versus 111.351 versus 110.766 versus 109.92 versus 110.49 versus
110.935 versus 110.818 versus 111.229 versus 110.737 versus 110.840 versus
111.07 versus 111.361 versus 111.344 versus 111.254 versus 111.621 versus
111.628 versus 111.744 versus 110.990 versus 110.995 versus 110.791 versus
110.871 versus 111.235 versus 111.084 versus 111.451 versus 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: 69.80, -0.45. Rallied through the 50 day SMA Wednesday and Thursday,
faded modestly Friday. Good break higher, now how it holds the 50 day MA is
key.
Gold: 1206.70, +1.70. After rallying through the 20 day EMA the prior
Friday, XGLD spent the week testing in a tight flag. Not a bad set up to
break higher, but why would it break higher if the Fed has things under
control? That said, gold has trended lower now for 5 months.
MONDAY
Tons of data coming out this week starting with the ISM and construction
Tuesday, ADP, Productivity revision, factory orders Thursday, and the Jobs
Report Friday.
More trade issues as the US and Canada resume on Wednesday. China will
surely have some more commentary about Trump given it has no favorable facts
to support its trade positions. Larry Kudlow said Friday that China had no
interest in talking; thus the personal attack campaign is at least
explained.
As for the market, stocks and the indices rallied to higher highs then faded
Thursday and Friday. The trends are still in place, buyers came in to push
stocks to higher highs, then they returned after a test to push them higher.
A good test in progress, a bit more would not be bad.
After the test we look to play upside as stocks rebound. Some are already
testing such as AMD, WSM, VRSN, ADBE, NANO, DOCU. We will let them develop
and as they break higher we can move in to catch the next run.
Trade remains an issue if just for short periods. NASDAQ is near the upper
trendline and that may stall some of the moves from big names such as AAPL,
AMZN. If so, however, a test then sets those stocks for some new entries as
well.
Yes, keep in mind the bulls indicator, that it is September, and the Fed is
on a hiking mission, but at this juncture you look at the action of solid
patterns and take the cues from there.
Have a great weekend and Labor Day!
End part 1
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