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10/8/2018 Investment House Daily
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- Futures lower and morning session selling sends many good setups to not so good setups.
- While some groups struggle, money still moves into others.
- SP500, DJ30 in nice tests, RUTX/SP400 at the 200 day MA, NASDAQ problematic.
- Volume disappointing as NASDAQ stocks test, bounce -- some.
- Some great setups still, but thus far nothing showing the big NASDAQ names are ready to rebound.
Futures lower and stocks started lower, continuing the selling from Thursday, at least for NASDAQ. The mid and small caps were way ahead of that game, and many sectors outside the big tech stocks were already selling.
Others were way ahead of the US. China was slammed even though it stands ready to survive any trade war with the US -- must be because it said so. But then again, it felt the need to reduce bank reserves by 100BP, effectively pumping $750B worth of yuan into its banking system. You only do that when you are oh so strong, ready to utterly defeat any enemy.
Italy saw its stocks and bonds dive after the EU said 'nein' to its budget plans. Italy takes some initiative because it is tired of the EU's dictates and the forced migration. Then of course the Germans, the power of the EU, pukes on it. All things normal in the EU.
With that backdrop there was not a lot to bolster investor optimism.
Now I know it is always touchy talking about how this is a good thing, something that, given it has started, needed to get it finished. The sellers were still there Friday even with that late session rebound. If the market started higher Monday, that would only give them a big fat target to sell. As it is, they sold it anyway, but it accomplishes an important step, i.e. crushing the life out of those hoping for that bounce. There was a modest post-open bounce, but that was snuffed and sold hard. Faint hopes dashed, confirming to the upside hopefuls that the sellers were in control.
Many groups, even recent leaders, were hit in the selling, e.g. ETN, JNJ. Many others, however, showed no stress, e.g. KO, WMT, PFE, DIS -- money was not only staying with them but moving into them as other groups sold.
After that faux bounce off the down open and following meltdown, stocks stopped selling at 10:30CT on some massive volume. 2 hours laterally with a bounce that failed and broke sharply lower -- a second bottom was put in. Another bounce and selloff did not reach the prior low. From there, that higher low off the double bottom, had cleared out the sellers on the session. Stocks rallied the last 2.5 hours of trade, even turning some of the indices positive.
SP500 -1.14, -0.04%
NASDAQ -52.50, -0.67%
DJ30 39.73, 0.15%
NASDAQ 100 -0.62%
VOLUME: NYSE -5%, NASDAQ -17%. Both still above average but both well off the levels from the selling. Not exactly reversal with meaning type of volume.
ADVANCE/DECLINE: NYSE flat, NASDAQ -1.5:1.
Bottom? It was for the day. Beyond that remains to be seen. Volume was simply not of the caliber of recent selling. Above average on both NYSE and NASDAQ, but well off the selling volumes. You want to see strong volume on a reversal, at least rivaling the selling trade, and that just did not happen.
Thus, as noted, whether this holds and upside can build upon it remains to be seen. Many well set up big names as of Friday are not so well set up as of the Monday close. Some are, e.g. ROKU, NVDA, MSFT, AAPL, AMD, DIS, XOM, GOOG (yes GOOG). Many were hurt, e.g. CRM, TTWO, ADBE, AMZN. The market needs to see money generally move back in to confirm the buyers have wrested control back.
There is still a lot of expressed concern about the Fed going too far yet again. Highly negative sentiment is an upside positive -- at some point. VIX jumped to 18 and change before backing off in the afternoon. VIX matched the late June high when SP500 sold off to the 50 day MA -- just as it has done this time around.
Okay, volume disappointing, some big names were okay but others damaged themselves (though not fatalities). What do the charts show?
SP500: tested the 50 day MA on the Thursday low, on the Friday low, and undercut the 50 day on the Monday low. Then SP500 rallied back to hold that support, closing flat. Doji with tail holding support. The missing ingredient: that jump in volume showing the buyers were moving all in on the break of support. Very much like how it held even without the volume as many of the recent leaders held the line and indeed moved higher.
DJ30: Very similar to SP500, just at the 20 day EMA. Tested Thursday and Friday, undercut it Monday then reversed to a gain. Volume held steady with the recent elevated trade, so the Dow volume is not bad -- showing relative strength in the selling and showing still solid volume n the rebound. That works.
SP400 and RUTX: Nice doji at the 200 day SMA with a second straight intraday tap at that key level and a second straight bounce off that tap. Three to four weeks downside to this level after steady rallies from the 50 day MA May through the highs in August and September. Now a 200 day SMA and that can reset the upside. Set up to do that, but the real proof is if there is buying. We will see.
NASDAQ/NDX: Gapped lower, sold lower, NASDAQ testing mid-range support. NASDAQ 100 tested the June peaks and the mid-August lows. Both showed doji with tail though they did not close positive and volume backed off to just above average, well off the recent selling volume spike. Down sharply starting Thursday; is it enough to bounce them sharply at this juncture? Many big names showed doji, but now not all are holding key support. Problematic and many eyes are on the names in NASDAQ and NASDAQ 100.
SOX: After the bomb lower Friday through the 200 day SMA, chip stocks received another downgrade, this one from Raymond James, cutting profit estimates and saying it was just too early for a bottom. With that, SOX held the June low and the May upside gap point, and for all intents and purposes the mid-August low, with a doji. SOX is at the bottom of a 4 month trading range and we will see if SOX bounces, too early for a bottom or not.
Several of the 'names' struggled from the biggest to software, what has been a solid group. Others were unphased, e.g. big drugs, retail, food. Money moving their way and not yet moving back to the big techs, big NASDAQ stocks.
FAANG: FB gapped lower, closed flat, still nothing exciting. GOOG is interesting, with a nice tight doji on the 200 day SMA, taping it on the low and bouncing.
SCAANN: SQ sold off 8.55% to the 50 day MA; key test after a nice 20 day EMA doji Friday. CRM broke hard below the 50 day MA, recovering some but not much. AAPL held the Friday low and rebounded to flat; light trade showing no heavy selling. AMZN gapped lower, sold off, but recovered to hold the July highs/August low. Okay, after 5 sessions lower it has to show if it can rebound. NFLX lower, recovered to hold the Friday low at the August low. A week down here as well. NVDA sold below the 50 day MA, bounced up, down, ending with a tight doji. Okay, time for this leader to bounce.
Energy: Solid. XOM bouncing nicely off near support. SPN in excellent position as is APC. ESV jumped upside; HOS did not but still looks good.
Software: Those great setups from Friday were pretty much waylaid. CRM broke the 50 day MA on volume. ADBE ditto, but did recover to hold some support. TTWO broke the 50 day MA. FFIV down farther but finally finding some support. VMW back to the support at 150. MSFT -- this one looks good with a hammer doji at the 50 day MA. DATA, NOW struggling at best.
Chips: AVGO shows a hammer doji at the 200 day SMA. LSCC testing the 10 day EMA after a break higher. NVDA a tight doji at the 50 day MA. INTC looks as if it could bounce off this test. SLAB still selling hard.
Financial: Not bad, selling early but recovering, e.g. JPM, C. GS looks as if it will try to bounce. Trying. Trying. V dove below the 50 day MA.
Machinery/Manufacturing: Some tests, e.g. DE, CAT, but they held. UTX sold but recovered to hold the 20 day. BA solid at the 10 day EMA with a doji. ETN, EMR showing doji at near support. Not a bad couple of groups.
Drugs: Good moves from PFE, BMY, LLY, MRK. Biotechs struggled though INFI held the 20 day EMA nicely in a solid test.
Retail: Showed backbone. WMT up solidly off the 50 day MA. ROST in a nice 50 day MA test. TJX still solid. ULTA is coming off a 50 day EMA test. Not bad.
MISC: MTCH still in the pattern at the bottom of the pennant. PYPL dives below the 200 day SMA. GRUB showing a doji after a 50 day MA breach last Thursday. TSLA is, once again, breaking lower and lower.
Stats: +39.73 points (+0.15%) to close at 26486.78
Stats: -52.50 points (-0.67%) to close at 7735.95
Volume: 2.24B (-17.04%)
Up Volume: 838.17M (+182.9M)
Down Volume: 1.38B (-620M)
A/D and Hi/Lo: Decliners led 1.45 to 1
Previous Session: Decliners led 2.27 to 1
New Highs: 24 (-6)
New Lows: 206 (+2)
Stats: -1.14 points (-0.04%) to close at 2884.43
NYSE Volume: 793.861M (-5.35%)
A/D and Hi/Lo: Advancers led 1.01 to 1
Previous Session: Decliners led 2.04 to 1
New Highs: 35 (+9)
New Lows: 334 (-62)
Still a lot of negativity about the market's future, today Cramer on his show talking at length about the view that the Fed will be too aggressive and tank the market and the economy. Chips downgraded (profit estimates cut) by Raymond James (a company with two first names). Plenty of negativity but of course the market is not acting to stop that.
VIX: 15.69; +0.87
VXN: 22.19; +0.69
VXO: 14.88; -0.38
Put/Call Ratio (CBOE): 1.17; -0.01
Bulls and Bears:
Second week above 60 for bulls. Got to 60, market started to falter. Bears finally broke over 18.3 after back and forth at that level for a month.
Bulls: 61.8 versus 60.6
Bears: 18.6 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: 61.8 versus 60.6 prior
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 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: 18.6 versus 18.3
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: Bond market closed. 3.233% 10 year.
Historical: the last sub-2% rate was in November 2016 (1.867%). 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% versus 2.941% versus 2.879% versus 2.904% versus 2.897% versus 2.86% versus 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: 1.14916 versus 1.15198. Euro sold to last week's low then rebounded, trying to set a near term bottom.
Historical: 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: 113.12 versus 113.706. Dollar dropped hard to the 20 day MA after a solid rally through the prior Tuesday.
Historical: Last below 109 four months back. 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: 74.29, -0.05. Big reach lower, then a recovery to hold the 10 day EMA with a hammer doji. Nice test, still in position to move higher.
Gold: 1188.60, -17.00. Dropped hard from the 50 day MA.
Not a convincing session for NASDAQ and the big name stocks. Damage was done to some leader patterns such as in software even as the same recent leaders received money. That is a pretty clear indication the rotation continues, or at least did through midday Monday. As of the Monday close, even with the rebound, however, it is problematic if they are ready to move higher.
No scheduled economic data; CPI is Thursday, and with the high level of Fed worry, that will be an important report.
So do you sit and wait? No, of course not. XOM, MSFT, AMD, DIS, ROST, WMT, and others look very good. Yes, yes, so did software Friday. Well, if other good groups break apart as did software, then there is likely more downside to come. For now, however, there is rotation that is really supporting some key groups and good names. If that continues and they move higher off good setups, we will play them -- money is moving, not abandoning the market.
Have a great evening!
End part 1
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