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10/16/2018 Investment House Daily
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Investment House Daily Subscribers:
Targets hit: None issued
Entry alerts: AMD; BILI; CNAT; FEYE; MTCH; NTES; PLAY; VIAV
Trailing stops: None issued
Stop alerts: None issued
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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 surges upside for the second time in three sessions
- Solid move from all indices, good NASDAQ volume, good breadth.
- Market has some solid leadership patterns but many more are just kneejerk rebounds from break neck selling.
- At this juncture still a just a bounce. Even with follow through it can still come back for a test.
- Playing stocks in solid patterns, watching to see if others form up good patterns as well for the next wave.
- Fed is still the X Factor and Wednesday it lets us see its minutes from the last meeting.
- NFLX crushes, LRCX surprises upside, IBM is back to missing revenues. Is NFLX a one-off or can earnings really rescue the market?
After a pause Monday the Friday rebound move resumed. The upside started late Monday and continued into the futures open. From there stocks gained upside all morning in a steady uptrend. Then they gained all session in continuing uptrends, closing with a sprint to the highs.
SP500 59.13, 2.15%
NASDAQ 214.75, 2.89%
DJ30 547.87, 2.17%
NASDAQ 100 2.94%
VOLUME: NYSE -5%, NASDAQ +22%. Volume dipped to just above average on NYSE, NASDAQ trade rocketed as money started moving back into tech stocks. As the gains held, more were forced to cover and longer term buyers were glad to buy.
ADVANCE/DECLINE: At 5.5:1 NYSE and 4:1 NASDAQ, breadth showed longer term buyers stepping in as well.
To view, click on the following links:
The 2% to 3% moves started making inroads into the selling. SP500 and NASDAQ moved back through the 200 day MA. NASDAQ 100 and the Dow jumped up off their tests of that level. RUTX, SP400 and SOX all gapped and rallied, all moving up to near the 10 day EMA, though still significantly below the 200 day SMA.
NASDAQ and DJ30 volume moved higher and above average. Good to see on the upside. NYSE trade was lower, however, holding just over average. Good and not so good, but you only need one index to show the strong action.
Still, at this point this has to be considered just a bounce. The rally started Friday, making Tuesday just the third day of the attempt. According to William O'Neil's system, the real pioneer in market follow through research, you start looking for a follow through on the fourth session after a reversal session where the market rebounded from the selling. That means Wednesday is the start of watching for a strong move higher.
Of course, even with a follow through there is no guarantee a rally succeeds. It is necessary but not sufficient. What do I always talk about? Leadership. Important stocks need to be in good patterns or working on good patterns to carry the move beyond just a rebound.
Many big name techs are rebounding but are not necessarily in great patterns. NFLX is not bad and it is rocketing higher afterhours (+40) and is in a good base. NVDA, AMZN, GOOG, VMW, SQ, CRM, GOOG, CSCO are not in good patterns: sold down hard and rebounding.
There are good patterns. JNJ, TLRY, CGC, FEYE, ROST, PLAY, APC, TTWO, AMD, WMT, HSY, DIS, VIAB, ULTA, TJX are all nice.
Overall, there are more weak patterns in the market than real strong ones. A bit more time is needed for more patterns to form up. That can come in a test of the recent low, i.e. after this motor higher runs out of gas it comes back to test the prior low from last week. That works to shake out the last sellers and is why, even though we picked up 8 upside positions today, all of them were in stocks with solid bases, not stocks that were gutted and just rebounding in relief. That gives them more staying power, but even so, if we get a few solid upside days with them we take some gain.
Then you play for the test of the prior low if it shows up, ready to enter when the test is made and holds.
It may not test but most often it does. You can get a William O'Neil follow through session and still get the test. As long as it does not violate the low on the recovery session then the follow through remains intact. Moreover, that buys TIME for stocks that are not in great bases to better form up. Rallies tend to have breakouts in waves, starting with stocks already in position at the time of the follow through (those cited above), followed by other groups that finish their bases and make new breakouts themselves.
Thus, you play the move as we are doing as the moves are explosive and sometimes these stocks don't come back. At the same time you watch the other stocks in the market and see how they are setting up and whether a new round of good patterns emerge. That can happen faster than you would initially think looking at some of the charts.
Accordingly, you never give up on the bounce initially if you have some good stocks in good patterns to lead. Others can set up quickly. We put money into the quality patterns on the rebound, those that represent the first breakouts from good patterns in a potential rally. Now we see if the market delivers a follow through and whether these stocks hold their patterns and breakouts and others form up during the upcoming sessions.
There are still issues confronting the market: trade, earnings, and of course, the Fed.
There are also market issues such as a horribly lagging semiconductor group. AMD looks great again, and there are a handful of other chips that are quite decent, but the majority are horrible. Perhaps LRCX can change some attitudes with its 10 point move higher afterhours on its results. Lots of work for this very important group.
The Fed deserves mentioning once more. I said last night and on the weekend I did not feel the Fed was, at this juncture, at a point where it is irreversible that it near term kills the market rally. The Tuesday move comports with that notion but it does not prove it.
If the chairman feels the markets are not listening or should fall, this kind of rally does not help the market's continued upside chances. The minutes for the last meeting just 3 weeks back are out Wednesday afternoon and they could again raise the Fed Fear. Moreover, you then get Fed officials 'explaining' what the minutes mean. All full of potential pitfalls.
Summary: Thus, while the bounce is strong and there are good patterns we are playing, the rally is not confirmed and other sectors have to come into line. Moreover, the Fed is the X Factor and you have to wonder just how strong/stubborn/obstinate Powell will be in light of the President's chides, the market's rebound, and the back and forth economic data (CPI, PPI easing, retail sales slower, jobs report unemployment and JOLTS strong). Yes, JOLT today was a jolt with 7,136,000 job openings. Highest in the survey's 20 year history.
We are playing god patterns upside and we entered more today. They are solid patterns and the idea is they should hold up even in a test. The others rebounding, we are letting them bounce and if they stall and start a fall, we close existing positions on them. Then we watch to see if they set up new patterns on the test of that first move. Then perhaps we get some double bottoms, etc.
Watch for follow through starting Wednesday (strong upside % move, strong volume), watch how the good patterns we are buying perform, watch for others setting up. They will tell the tale.
Afterhours NFLX, LRCX are jumping nicely, CSX beat and is showing railroad-like enthusiasm (i.e. not much), while IBM is dumping nicely as it missed revenues. NFLX is at the early October highs on this afterhours surge -- it looks to gap into resistance and how that plays out is important, but we also note NFLX is in a very good pattern, having started work on it back in early July. It would appear that the first round of earnings is good for some high visibility names. Many were looking for earnings to get the market out of its funk. More reactions such as NFLX will not hurt.
Remember, we are still looking at a rally to year end off this October selling. 2 of 3 sessions solid upside, moving in on good patterns breaking higher when they show the moves, still cognizant a test can come and more leadership is needed, but not a bad start.
Have a great evening!
Stats: +547.87 points (+2.17%) to close at 25798.42
Stats: +214.75 points (+2.89%) to close at 7645.49
Volume: 2.62B (+21.86%)
Up Volume: 2.22B (+1.19B)
Down Volume: 393M (-717M)
A/D and Hi/Lo: Advancers led 4.02 to 1
Previous Session: Advancers led 1.15 to 1
New Highs: 21 (+3)
New Lows: 91 (-61)
Stats: +59.13 points (+2.15%) to close at 2809.92
NYSE Volume: 783.595M (-4.57%)
Up Volume: 680.188M (+209.639M)
Down Volume: 118.093M (-221.79M)
A/D and Hi/Lo: Advancers led 5.53 to 1
Previous Session: Advancers led 1.45 to 1
New Highs: 14 (+4)
New Lows: 95 (-121)
VIX: 17.62; -3.68
VXN: 22.51; -4.30
VXO: 17.31; -3.74
Put/Call Ratio (CBOE): 1.03; +0.07
Bulls and Bears:
A somewhat precipitous plunge after a 61.8 peak on this move. Right at the range of the prior drops starts, 50ish is the lows before a bounce. Bears actually fell 0.1.
Bulls: 56.3 versus 61.8
Bears: 18.5 versus 18.6
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: 56.3 versus 61.8
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: 18.5 versus 18.6
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: 3.165% versus 3.158%. Bonds holding the rebound to the 10 day EMA but not moving farther the past three sessions.
Historical: the last sub-2% rate was in November 2016 (1.867%). 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: 1.1578 versus 1.15906
Historical: 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 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
USD/JPY: 112.343 versus 111.848. Holding at the 50 day MA, starting to bounce.
Historical: Last below 109 in June 2018: 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 versus 111.448 versus 111.468 versus 111.082 versus 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
Oil: 71.92, +0.14. Holding the 50 day EMA with a second doji. Looks good to rebound.
Gold: 1231.00, +0.70.
End part 1 of 2
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