Tuesday, October 09, 2018

The Daily, Part 1 of 3, 10-9-18

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10/9/2018 Investment House Daily
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Targets hit: None issued
Entry alerts: DIS
Trailing stops: ETN; HON
Stop alerts: None issued

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Tuesday and Thursday reports will contain the market summary, chart links to view the index charts, and updated play table.

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- Soft start, a rally, then back to the Monday close.
- Bonds hit a 7 year high overnight but back off below the Friday close.
- Indices in the same position, but it is never a good thing to give up a break higher after a pretty solid bout of selling.
- Same stocks continue working, same stocks hold steady, but some that were better turn to questionable.
- Sentiment: Another bull turns bearish, mostly thanks to the Fed
- CPI Thursday, bank earnings Friday morning, indices still at the same levels: letting them show if they can hold.

Tuesday morning the 10 year bond yield hit a 7 year high overnight and they were running that 'breaking news' all pre-market. Thing is, yields backed off from that high and indeed were lower heading into the open. But hey, don't let a good headline be dissuaded by actual events.

Even with that 7 year itch for the 10 year, the stock market bounced though it had to fight through a sluggish open for the NYSE as NASDAQ took the upside lead. There was only so much the stock market could do to the upside, however. Just after 10:00ET the high was in, however. Stocks sold to midday, recovered into the afternoon session, but then in the last hour selling came back in and flushed away an SP500 positive close as well as most of NASDAQ's gain. The latter was 59 points higher on the session before it lost headway and fell basically flat.

In the end, no change for the indices. SP500 at the 50 day EMA for a third session. DJ30 at the 20 day EMA for a third. RUTX and SP400 put in another day at the 200 day MA. NASDAQ and NASDAQ 100 held the same space below the 50 day MA, somewhat in no-index' land. SOX is similar, holding the late June low after blowing out the bottom of its triangle Friday.

SP500 -4.09, -0.14%
NASDAQ 2.07, 0.03%
DJ30 -56.21, -0.21%
SP400 -0.56%
RUTX -0.47%
SOX -0.07$
NASDAQ 100 0.26%

No change but that is not necessarily good. The reason: the indices started flat to lower but then rallied nicely positive with NASDAQ up over 0.5%. Then it was gone. An oversold rally that rallied but then lost its steam intraday. It almost seems lucky the indices held the same levels, support or not.

Same stocks show same action.

Interestingly, many sectors or certain stocks within sectors performed exactly as they have in the prior sessions. Drugs solid (PFE, MRK, BMY), energy solid (APC, APA), retail (WMT surges, ROST rallies on volume), media/entertainment (DIS, ROKU), AAPL and MSFT.

Of course not all were upside. SQ still at the 50 day MA. NVDA showed another doji just below the 50 day MA. AMZN, CRM ditto. NFLX did rebound above the 50 day SMA.

Some that were solid were not on Tuesday: UTX, CAT, DE, ETN, EMR. A 'rebound' day that gave up the rebound in most cases and was not a rebound but a selloff in others.

Definitely not a good session. It was at best a push, i.e. no change. There was some change, upside and downside, but overall a bounce failed. That said, four indices held good support, and in the past they have spent about a week at key support in a test before moving higher. See SP500, NASDAQ, DJ30 in late June, the last serious test, for an example of this.


To view, click on the following links:


SP500: Still at the 50 day EMA, very similar to the late June test, the last selloff for the market. Seven days at the 50 day MA. The current test: 3 sessions. Volume was higher on the hammer doji at support, a good thing. SP500 gave up a gain, not a good thing, but the prior test had similar sessions. For now we let it work to see if it can hold and deliver upside again.

DJ30: Second doji at the 20 day EMA, third session at this near support. Spent 6 sessions here in early September. Still looks good with many Dow stocks in good position. One thing holding it back: rotation within and among the Dow stocks. CAT down, WMT, MSFT up. Just recently CAT broke nicely higher.

SP400 and RUTX: Third day of testing and holding the 200 day SMA for these two. Still very much oversold, but as with the other indices, a look at past tests may help. In March SP500 spent 11 sessions bouncing along this support before moving back up. June it spent another four sessions. Down 3+ weeks in a sharp decline, oversold, likely bounced, but it may take more time here to set that up.

NASDAQ/NDX: Started flat, moved higher to 7800 just as on Monday, and it stalled and fell back. NDX finding resistance at 7400. Both continue to hold below the 50 day MA. NASDAQ touched down near the lower channel line on the Monday low. Not looking that healthy.

SOX: A second doji after the Friday break below the lower trendline of the 6 month triangle. Some chips look good, but overall they are still struggling.


Stats: -56.21 points (-0.21%) to close at 26430.57

Stats: +2.07 points (+0.03%) to close at 7738.02
Volume: 2.46B (+9.82%)

Up Volume: 1.17B (+331.83M)
Down Volume: 1.27B (-110M)

A/D and Hi/Lo: Decliners led 1.51 to 1
Previous Session: Decliners led 1.45 to 1

New Highs: 26 (+2)
New Lows: 159 (-47)

Stats: -4.09 points (-0.14%) to close at 2880.34
NYSE Volume: 803.211M (+1.18%)

A/D and Hi/Lo: Decliners led 1.11 to 1
Previous Session: Advancers led 1.01 to 1

New Highs: 47 (+12)
New Lows: 248 (-86)


CNBC's Cramer, who has been an optimist, has now swung to the other extreme in his obsessive/compulsive personality. This morning he was morose, carping about other commentators who don't understand 'his' work. From there he turned to the economy and PPG's earnings warning about trade and interest rates decimating its bottom line. Cramer complained about housing (while complaining about people complaining about his complaining), autos, and retail, stating the economy is slowing down and that earnings will disappoint due to rates and a strong dollar. Add to that his justifiable concern regarding the Fed and Powell's talk that we have outlined for the past month, and you have morose Jim instead of absurdly ebullient Jim.

The point: sentiment. A bull holdout is glum, saying you have to sell industrials given oil prices are holding gains, the dollar is strong (and thus a 'nightmare' for certain companies), and rates are strong -- all impacting earnings. Earnings expectations price stocks. That is the truism above even sentiment. A full bull is now bearish-ish, but fi earnings are declining then stock prices will further decline.

VIX: 15.95; +0.26. Still holding over the 200 but again giving up a move to near 18.
VXN: 21.62; -0.57
VXO: 15.36; +0.48

Put/Call Ratio (CBOE): 0.94; -0.23

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: 3.206% versus 3.233% 10 year. Overnight the 10 year yield hit a seven year high. Long before the open, however, the 10 year yield was sharply lower though still elevated. Bonds rallied back some after a week of selling off. Oversold bounce.

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: 1.14966 versus 1.14916

Historical: 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: 113.01 versus 113.12. Holding a test at the 20 day EMA.

Historical: Last below 109 four months back. 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: 74.96, +0.67. Bounced off the 10 day EMA test after the higher high, holding the prior June high as support.

Gold: 191.50, +2.90.


PPI is out as there will actually be some news other than sentiment statements and conjecture. PPI is important as a possible precursor to what consumer prices might be, but often there is little correlation. The CPI Thursday of course carries more weight, and with the current worry regarding prices and Powell overreacting to inflation worries, that makes CPI large. Perhaps large enough to keep stocks at bay until it comes out.

Tonight the President is getting into the rate picture again, criticizing the Fed, saying it is going too fast. Perhaps he saw a clip of Cramer from the morning who basically said the Fed was going to crash the market and the economy. Sure it will; the question is when?

Earnings also start this week with JPM and C on Friday before the open. BAC is Monday. The bank stocks definitely are NOT sitting on rallies going into results. Like that they have pulled back to support.

Is this test the start of a crash? It doesn't look good, but have to see how this support test plays out. This market and its participants panic every time there is a pullback to support. This one has some rotation so that is even more of a twist, inducing more stress and fretting. Sure it can bomb lower still in a real crash. Thus far, however, 4 indices are at important support in a test very similar to . . . the June 'crash' that panicked the market as well. Think I am lying? Just look at the VIX; it shows the same action. The difference is, of course, interest rates have finally started to move higher. That has occurred in fits and starts several times during the market move, but the market is just not used to rates near 0%. Thus, it sees all rate rises as causing economic issues when it is economic issues driving rates higher. Stronger economy, more demand for money, higher rates. The market is just spooked at how rapidly they rose: no frog in simmering water, but the frog thrown into hot water.

We are letting this play out. We sold off quite a few positions as it started, now wish we had sold more but thus far the indices can bounce and still take positions into nice . . . position. That makes the resolution of this attempt to hold important -- duh -- but looking at many stocks, after falling 4 sessions to support, it is not the right time, in most instances, to sell them. Again, we will see how this test of support is resolved.

Have a great evening!

End part 1
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