Monday, October 15, 2018

The Daily, Part 1 of 3, 10-15-18

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10/15/2018 Investment House Daily
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Investment House Daily Subscribers:



Targets hit: MNST
Entry alerts: CGC; CRON; HMY; MUX; TLRY
Trailing stops: None issued
Stop alerts: VCEL

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- Relief move struggles the day after -- for some stocks.
- More call a market top, blaming the FOMC's new stance. That rattled the market, but it could be that the predictions are too pat and premature.
- New leaders emerge while others perform well. The uptrend can actually survive without all the prior leaders.
- Calling the prior big NASDAQ leaders through may be premature as well as they base out while others move higher.
- Retail Sales disappoint (hello? Federal Reserve?) mostly thanks to the hurricane.
- New leaders break higher, and even with 'the Fed did it' as the pervasive reason for calls of a market top, the indices remain at very important levels and still have to show they can recover.

The Friday rally was greeted with a large drop in futures on the Monday early morning open. They managed to cut the losses moving toward the bell, but as soon as the regular session started, stocks started to rollercoaster. Down, then up to midmorning, back down, then a higher low to mid-afternoon only to roll back over in the last hour to various degrees depending upon the index.

Once again, the NASDAQ-related growth areas were the hardest hit with NASDAQ 100 leading lower, down even more than SOX. Small caps and midcaps posted gains, NYSE large caps were down somewhat modestly, at least by recent standards.

SP500 -16.34, -0.59%
NASDAQ -66.15, -0.88%
DJ30 -89.44, -0.35%
SP400 0.42%
RUTX 0.41%
SOX -0.94%
NASDAQ 100 -1.24%

VOLUME: NYSE -14%, NASDAQ -20%. NYSE trade fell back to average, NASDAQ was right below average. At least no heavy selling renewing as the indices sagged to start the week and after that Friday rally.

ADVANCE/DECLINE: NYSE 1.5:1, NSA 1.2:1. At least there was upside with most indices lower. Thanks to small and midcaps.

As the percentages show, the big NASDAQ names were the favored downside targets, giving back a good part of the Friday gains. AAPL dropped on GS musings that it would see a huge slowdown in Chinese sales. AMZN faded but held the Thursday gap point on light trade. NVDA sold back down to the Thursday low. NFLX was dissed again, but it tapped the 200 day SMA and held up well. INTC, CSCO, MSFT all sold back, all weighing on the big NASDAQ indices.

On the other side of the ledger, some really quality names posted really quality moves. Perhaps some not so quality names, but certainly with very good patterns. ULTA added over 2% to its upside break. WBA added 1.66%. The pot stocks fired up and got high results: CGC +14%, CRON +19%, TLRY +11%. I guess they are the new 'cloud' stocks . . . We thought the MUX and HMY moves were great . . . and they were . . . just not juxtaposed to the refer stocks. DIS, FEYE, BILI and others were decent, but want to see more from them before we commit any money to the latter two.

Still others went nowhere, just pausing the day after the bounce, e.g. APC, FFIV, CLF.

Mostly this was a soft Monday after a Friday relief bounce. Beleaguered stocks tried to hang on, decent stocks held their position, strong stocks rallied and rallied well.

The takeaway: lots of commentary that the market has topped. Very smart and wealthy billionaires reiterated their cautious positions while others 'confirmed' the market has indeed topped. At the same time, different areas of stocks shot higher, and contrary to what some on afterhours shows are saying, the upside is not populated by consumer products stocks such as CLX (CLX rebounded from a sharp Thursday plunge, but is still in a bear flag pattern). New growth areas in pot (get it? Growth?) and industrial metals are working well. Of course, so are precious metals and utilities stocks, not your major growth areas. So, there is some empirical evidence investors are in part ACTING as if there is a top.

The interesting thing is, usually when the Fed blows up the market it is not so commonly predicted. In my many years of market trading and watching, I do not recall the FOMC getting such wide coverage as being in the process of causing a market top. Not that we did not point it here at the time, but never has it been so publicly predicted in so many different quarters. That in itself makes a reasonable, dispassionate observer have to ask if that is thus not the case. Typically when everyone believes something about the market, they are wrong. Certain areas may have topped, but just because a group of leaders is suffering outbound rotation does not mean the money is leaving the market or going only into consumer products. Indeed, it is going into other areas, perhaps tentatively for now.

Consider ADBE afterhours. It preannounced good results and jumped 13+ points from the close. Still some life there off the 200 day SMA test. Consider NFLX. It was cited as selling off today and it did decline, but it tapped the 200 day SMA on the low and rebounded to cut losses on lower trade. It is still doing a very decent job of working on a base. AMZN sold as well, but it held the Wednesday upper gap point on the close, a point also marked by other price highs and lows. TTWO sold off intraday but then recovered to a modest loss.

I am not saying they will change NASDAQ's fate. They are just not behaving exactly as a whipped upside move acts. It may just be that the calls of 'the Fed ruined this market' and 'the top is in place' might 1) be premature; 2) right only as to specific groups and only while they base back out, and 3) just wrong because the market typically does not react the way the consensus is sure it must react.

For sure there are areas worth buying, areas that do not move snail-like, and we bought some of those today. They are getting money, not seeing it leave. If money keeps moving their way and the Fed does have to back off, Trump comments or no Trump comments, then the new leaders and the old basing leaders suddenly all become attractive. Not saying that will be the case, but we will buy good stocks getting money and make money on them.


SP500: Moved over the 200 day SMA intraday but could not stick the move. Lower, average volume on the selling so no major dumping, but that already occurred, right? At the 78% Fibonacci retracement of the late June to early October move, an interesting pint for it to try and set up some kind of pattern. A lot of work to do and the financial stocks are an albatross around its neck, but we will see how this shakes out.

DJ30: Rallied to 25,000 then backed off to a loss. Still holding the 200 day SMA where it has held before in this move, and after that run higher from the June low to early October, the 200 day SMA is a logical test point to reset and restart. Being patient to see if it can once again hold and make a low at the 200 day.

NASDAQ 100: At the 200 day SMA as well, fading off the Friday close but still holding the support it won back. Rallied up the 50 day MA four bounced, now testing the 200 day SMA again, and as with DJ30, watching to see if the big NASDAQ names can reset and rebound anew. Maligned for sure, but as noted earlier, some of the names such as NFLX and AMZN are holding well despite closing lower on the session.

NASDAQ: Below the 200 day SMA, fading away on lower, below average volume to start the weeks. Same action as NASDAQ 100, just on the other side of the 200 day.

SP400: Rallied modestly though closed well off the intraday high. Holding near the March to May lows but not much more to say about it until its next move.

RUTX: The small caps bounced modestly off the tight Friday doji. Still hugely oversold but not yet showing any kind of serious bounce.

SOX: Backed off the Friday bounce, holding half the move. Still at the bottom of the 11 month range where it held at the December, February, and April lows.


The same groups from Friday looked good: precious metals, industrial metals, certain retail (ULTA, ROST, RH, WMT), NFLX, some energy stocks, machinery (DE, CMI, XONE), food (HSY), telecom (VIAV), and even some Chinese stocks (e.g. BILI, NTES).


Stats: -89.44 points (-0.35%) to close at 25250.55

Stats: -66.15 points (-0.88%) to close at 7430.74
Volume: 2.15B (-19.48%)

Up Volume: 1.03B (-950M)
Down Volume: 1.11B (+458.69M)

A/D and Hi/Lo: Advancers led 1.15 to 1
Previous Session: Advancers led 1.51 to 1

New Highs: 18 (0)
New Lows: 152 (-113)

Stats: -16.34 points (-0.59%) to close at 2750.79
NYSE Volume: 821.078M (-14.31%)

Up Volume: 470.549M (-132.528M)
Down Volume: 339.883M (-996.169K)

A/D and Hi/Lo: Advancers led 1.45 to 1
Previous Session: Advancers led 1.35 to 1

New Highs: 10 (0)
New Lows: 216 (-180)


VIX: 21.30; -0.01
VXN: 26.81; +2.12
VXO: 21.05; -0.11

Put/Call Ratio (CBOE): 0.96; -0.20

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: 3.158% versus 3.167%. Modest gain in the 10 year, TLT flat at the rebound to the 10 day EMA.

Historical: the last sub-2% rate was in November 2016 (1.867%). 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: 1.15906 versus 1.15592

Historical: 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: 111.848 versus 112.222. Broke below the 50 day MA on the close.

Historical: Last below 109 in June 2018: 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: 71.78, +0.44. Big doji at the 50 day EMA. Should be where it holds if it is going to bounce anew.

Gold: 1230.30, +8.30. Not huge, but another solid move higher after that Thursday blast through the 50 day MA's. First time over the 50 day MA since it fell below it late April.


More earnings, Industrial Production and Capacity Utilization. This after September retail sales limped in at 0.1% (0.6% expected) with ex-autos negative (-0.1%) instead of the 0.4% gain expected. August was dropped to 0.2 from 0.3. Restaurants and Bars fell 1.8%, the largest drop in 2 years, but it was pretty obvious the hurricane caused that. At least the New York PMI beat at 21.1 (18.0 expected) and better than September's 19.0.

The big news for the week of course are earnings, BUT also the Wednesday FOMC Minutes from the recent late September meeting Powell transfiguration into a generic Phillips Curve worshiping Fed chairman, suddenly fearing inflation at every corner. I have nothing against getting interest rates to reflect neutral. I do take issue with the Fed actually knowing where neutral is, and MORE importantly, thinking it has to be more restrictive than neutral to avoid 'overheating' and inflation, 'wage led' or other fabricated Phillips Curve folly.

With his comments, Powell spooked the market. In the aftermath, many people, as discussed earlier, staked out the position the market has topped, basing that on the chairman's change of rhetoric as well as the market plunge immediately subsequent. Pretty solid evidence.

Nonetheless I don't 100% believe that is the case. I think it is too pat, too widespread in its belief to be true. I don't know -- no one does -- but I am anticipating a rebound into year end. I know -- in this environment that is considered heresy, and perhaps I am dead wrong. Been that before. Thing is, the leaders they are looking at may not be the stocks that lead the next move. It is not all consumer products and utilities leading higher. Money is finding new areas and recycling into 'old' areas. Perhaps there are not enough of these other sectors to make a difference, but there are great setups that can make great breaks higher as we saw today with CGC, CRON, TLRY, MUX -- joining other moves from Friday such as ULTA, DIS. Not a ton, but some quality, and we will continue watching for and playing these stocks if they keep generating good patterns and breaking higher as money jumps their way.

Have a great evening!

End part 1
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