Wednesday, October 31, 2018

The Daily, Part 1, 10-31-18

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10/31/2018 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: None issued
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Trailing stops: None issued
Stop alerts: None issued

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- Upside continues with NASDAQ leading the way, large cap NYSE following, smaller caps lag quite a bit.
- Good volume, breadth shows just a large cap move.
- Big techs show gaps that surge then fade off the high.
- Second day of rally and some pundits are saying the bottom is in. Changing mid-stream just as the Fed, eh?
- Bounce continues. Great. Still needs a follow through.

The rebound continued for a second session. 'Growth' was given the nod for the leadership role by the financial stations, but growth with limits. NASDAQ rose 2.01% and NASDAQ 100 2.31%, but RUTX and SP400 lagged and lagged significantly at 0.32% and 0.31%, respectively. SOX was up less than NASDAQ. Moreover, the indices all finished fairly significantly off the highs. Up, but not a banner move. A very bounce-type rally.

The 'growth' areas -- meaning NASDAQ -- did perform better while the recent leaders in retail, food, drugs took a day off. NFLX, NVDA, AMZN, GOOG, AAPL, FB, MSFT, INTC all gapped upside but as with the indices, they gave back varying portions of the move. All positive, just some more positive than others.

SP500 29.11, 1.09%
NASDAQ 144.25, 2.01%
DJ30 241.12, 0.97%
SP400 0.31%
RUTX 0.32%
SOX 1.24%
NASDAQ 100 2.31%

VOLUME: NYSE +10%, NASDAQ +11%. Very solid upside trade with NYSE the strongest of the recent period, NASDAQ hanging in near the top of its peaks. Some good trade upside is of course a good thing.

ADVANCE/DECLINE: NYSE 1.5:1, NASDAQ 1.6:1. Okay, clearly a large cap move.

And the reason for the rally is . . .

Sure there were positives. But as noted in recent reports, the stories are the stories, and the market technical setups are what is controlling the action.

China: Reported lower than expected manufacturing growth, but the government assures us all that more stimulus would be forthcoming. Markets love stimulus, particularly Chinese stimulus as China builds its debt and credit icebergs even bigger.

Kudlow then chimed in that additional Chinese tariffs were not set in stone. Of course not; no one has chiseled them yet, but . . . the likelihood of China capitulating on the Administration's requirements even to meet and talk are somewhat remote.

Yellen: She speaks. And it is drivel. Yellen feels two more rate hikes appropriate, but fears the debt (NOW she fears debt? After the HUGE increase during her reign and she said nothing? Does this not seem strange, almost political? The debt more than doubled during the prior administration, adding more to the debt that all prior administrations combined, but that was nothing for Janet to worry about? Damnit, Janet!

Her solution? Janet says if she had a magic wand she would raise taxes. Seriously, a magic wand and you do what they do all the time? If we are talking magic, why not eliminate waste, duplication, fraud, and slashing government spending? Have the working aged people working and productive versus 95+M working aged not working and living off entitlements? Are we not all better off if we are all productive and prosperous? Is it not better for everyone to make a great wage or salary? Less government, motivated workers who do the will of the electorate versus pursue their own agendas? Raise taxes? That is the best you have Janet? Yellen is an idiot as she proved in trying to get Greenspan to 'pick a number' in terms of what is acceptable inflation. The Fed members have untold hundreds of thousands of dollars of education between them, perhaps millions. Yet they absolutely have no clue how real world, real life economics works. And we entrust these clowns with our wealth? Seriously?

Wages and salaries +3.1%, also the highest in 10 years. 2008. Hmm. The end of the prior expansion, then the drought through 2016. Policies changed, regulations slashed, taxes reformed, growth resumes. Amazing how this is shown time and time again, but no one learns.



Gaps upside then various success holding them. At this juncture there is no follow through yet. Too early. That would come Friday at the earliest.

NASDAQ: Strong gap upside, rallied through the 10 day EMA, backing off some to close. Something of a doji finish to the day. Volume jumped, breadth not commensurate with the price move. Basically a solid large cap move as a lot of the thrashed and trashed big name techs were bought. Thus far a lot of gaps, but gaps to doji in many cases, not altering their patterns, just oversold bounces from really oversold stocks.

SP500: Gapped to the 10 day EMA, surged through it, faded to close right at the 10 day with a tombstone doji. Strong volume. Thus far, a relief bounce.

DJ30: Gapped upside for a second day of rallying, moved through the 200 day SMA to the 20 day, then faded to close just below the 200 day. Strong volume. The tech aspects definitely helped as the more staid, stoic stocks faded a bit after good moves.

RUTX: Underwhelming in its action, gapping, rallying through the 10 day EMA, selling off to close below that level with a tombstone doji. Less than inspiring.

SP400: Gapped upside to just below the 10 day EMA, moved through it, reversed to close at the session low though posting a gain.

SOX: Gapped over the 10 day EMA to a doji. Okay, a second day of upside off the lateral consolidation. Not bad, not great. Very much a relief move.

NASDAQ 100: Gapped to just below the 10 day EMA, rallied through it near the 200 day, faded to close just over the 10 day. Excellent volume. The biggest of the NASDAQ big names moved higher, but the pattern is still less than great. An ABCD bounce? Could be.


Recent leaders took a day off as the thrashed big techs posted the better moves.

Retail: WMT backed off a bit. ROST, FOSL as well. ULTA made a nice recovery. Good group, took a day.

Food: Also many took a breather. KO continued upside, but MCD; HSY, MKC faded recent moves just a bit.

Telecom: VZ sold back some from a strong move but S gapped upside off the 200 day SMA. AUDC started upside off a quick breakout test; were hoping for a bit more testing. TMUS up solidly on earnings.

Drugs: JNJ faded modestly. PFE still solid. MRK gapped modestly to a doji. AMGN was up on some volume on earnings, but just not that strong of a pattern.

Software: DATA continued a strong move, gapping and rallying. VRSN made a second move up off the 200 day SMA sporting good volume. TTWO gapped and rallied to the 50 day SMA. Decent recovery, but it is just a recovery thus far.

SCAANN: SQ gapped upside off the 200 day SMA. Not bad, but sketchy at this point. CRM gapped over the 200 day SMA on lower volume; just a bounce. AAPL gapped up to the test the 50 day SMA. AMZN gapped upside on still above average, but a lot lower. NFLX and NVDA both gapped upside, but to doji below the 10 day EMA.

FB gapped on its earnings, but did not change its condition. GOOG gapped and tapped at the 20 day EMA then faded some. Lower trade.


Stats: +241.12 points (+0.97%) to close at 25115.76

Stats: +144.25 points (+2.01%) to close at 7305.90
Volume: 2.91B (+10.89%)

Up Volume: 2B (+90M)
Down Volume: 882.61M (+137.42M)

A/D and Hi/Lo: Advancers led 1.59 to 1
Previous Session: Advancers led 2.09 to 1

New Highs: 45 (+26)
New Lows: 136 (-89)

Stats: +29.11 points (+1.09%) to close at 2711.74
NYSE Volume: 1.283B (+9.74%)

Up Volume: 783.701M (-130.914M)
Down Volume: 491.633M (+241.388M)

A/D and Hi/Lo: Advancers led 1.5 to 1
Previous Session: Advancers led 2.33 to 1

New Highs: 25 (-3)
New Lows: 142 (-194)


VIX: 21.23; -2.12
VXN: 29.12; -1.61
VXO: 23.57; -1.90

Put/Call Ratio (CBOE): 1.12; -0.06. Twelve sessions upside in a row. 15 of 16.

Bulls and Bears:

Bulls continued to fall though at a slower pace. Bears almost 'jumped' for them. Stubbornly low are those bears. It is best to see the bulls and bears converge, the former down, the latter up. They are, but in very slight moves.

Bulls: 50.5 versus 51.9

Bears: 19.0 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: 50.5 versus 51.9
51.9 versus 56.3 versus 61.8 versus 60.6 versus 59.0 versus 57.7 versus 60.1 versus 59.6 versus 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

Bears: 19.0 versus 18.3
18.3 versus 18.5 versus 18.6 versus 18.3 versus 18.1 versus 18.3 versus 18.1 versus 18.3 versus 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


Bonds: 3.149% versus 3.119%

Historical: the last sub-2% rate was in November 2016 (1.867%). 3.119% versus 3.089% versus 3.079% versus 3.126% versus 3.111% versus 3.1692% versus 3.20% versus 3.196% versus 3.1779% versus 3.209% versus 3.165% versus 3.158% versus 3.167% versus 3.146% versus 3.169 versus 3.206% versus 3.233% versus 3.189% versus 3.183% versus 3.061% versus 3.087% versus 3.061% versus 3.052% versus 3.048% versus 3.048% versus 3.085% versus 3.066% versus 3.068% versus 3.076% versus 3.057% versus 2.99% versus 3.00% versus 2.972% versus 2.963% versus 2.977% versus 2.937%

EUR/USD: 1.13394 versus 1.13455. Euro faded a bit more but showed a doji.

Historical: 1.13455 versus 1.13760 versus 1.14042 versus 1.13757 versus 1.3972 versus 1.14682 versus 1.14626 versus 1.1538 versus 1.14556 versus 1.14961 versus 1.1578 versus 1.15906 versus 1.15592 versus 1.15901 versus 1.15324 versus 1.4966 versus 1.4916 versus 1.1598 versus 1.15164 versus 1.14762 versus 1.15517 versus 1.15774 versus 1.16038 versus 1.16357 versus 1.17501 versus 1.17658 versus 1.17476 versus 1.17486 versus 1.17772 vs 1.16833 versus 1.16692 versus 1.16858 versus 1.16226 versus 1.16900 versus 1.15863 versus 1.16016 versus 1.15946 versus 1.15534 versus 1.16243 versus 1.16341 versus 1.15832 versus 1.16029 versus 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

USD/JPY: 112.877 versus 113.074. Dollar faded.

Historical: Last below 109 in June 2018: 112.876 versus 112.58 versus 111.89 versus 112.391 versus 112.091 versus 112.427 versus 112.680 versus 112.527 versus 112.385 versus 112.553 versus 112.558 versus 111.848 versus 112.222 versus 112.076 versus 112.158 versus 113.01 versus 113.12 versus 113.706 versus 113.894 versus 114.383 versus 113.642 versus 113.690 versus 112.734 versus 112.981 versus 112.811 versus 112.575 versus 112.448 versus 112.247 versus 112.369 versus 111.849 versus 112.06 versus 111.81 versus 111.491 versus 111.608 versus 111.192 versus 111.064 versus 110.680

Oil: 65.31, -0.87. Oil fell to a lower low on this selloff.

Gold: 1215.00, -10.30. Impressive dip to the 50 day SMA.


Two days upside in the relief move and you are surely hearing the calls of this is a bottom, this is a real rally, this is the time to buy. Perhaps they are correct, but factor this in: the Fed was so logical and deliberate when it started its hiking campaign, enunciating a clear game plan that sounded so plausible. Then a month ago, midstream, it changed to a plan of tightening past neutral (of course it does not know what neutral is) because the economy is just so darn strong -- just as the data starts to seriously weaken. Look at all of the top line revenues misses.

The pundits are worried, beaten up, then you get an oversold bounce that shows some really good strength (though not breadth) for a couple of sessions. Oh, that was THE time to buy say the experts, and it just so happens they were the ones buying they tell you. Okay, remember in the event the market falls.

Sure, we bought some as well, but we bought solid patterns. We will see if this pans out for gains, but we are not changing the plan, not kidding ourselves that this is some new bull run to new highs. As you know, we did not buy today. Playing these big tech names on a big gap upside on a second day of a bounce with no follow through is just not a good change of game plan.

Indeed, at this juncture it may be the case we let the plays we bought work then see if follow through occurs. If it does and more stocks are in good position, great. In the interim we will see how the move plays out and if any other great buys turn up.

Have a great evening!

End part 1
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1 comment:

Unknown said...

Good point about this relief rally making it to the 200D then perhaps filling the Wednesday's gap. How long do you think it'll take to 'burn through' the 200D given the steepness of this decline?