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11/26/2018 Investment House Daily
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Investment House Daily Subscribers:
Targets hit: None issued
Entry alerts: AXP; DATA; ENPH; VRSN
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.
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- The bounce was set up, stocks bounced.
- Some new areas look decent, some old areas move well, the recent leaders were sluggish.
- Black Friday sales solid but it is a lagging indicator. That is okay: the Fed is a lacking as well.
- Picked up some new positions, looking at more on this BOUNCE.
After last week's test of the October lows by all but SP400, the indices started the week upside. The futures gapped higher, stocks range-traded for three hours, then rallied to session highs at the close. Not bad with gaps upside, holding the move, then rallying to the close.
SP500 40.89, 1.55%
NASDAQ 142.87, 2.06%
DJ30 354.29, 1.46%
NASDAQ 100 2.31%
VOLUME: NYSE +96%, NASDAQ +112%. Jumped, but still below average and thus not so grand in the grand scheme.
ADVANCE/DECLINE: NYSE 1.7:1, NASDAQ 1.5:1. Wow, that scares . . . no one.
Of course volume was up after the Friday half session, but it was still below average on NYSE and NASDAQ. Basically it was a technical move with the indices really oversold and a test of the October selloff low. The selling put the recent leaders in a near support test while others such as the semiconductors, China stocks, and some software formed decent patterns to turn and rebound. They started bouncing Monday with varying degrees of success, e.g. XLNX QIWI, DATA. We picked up some AXP as it jumped sharply post-Black Friday and we took half positions on DATA and VRSN. Perhaps we should have bought some BABA as it gapped over the 50 day MA, but figured we would see if this gap held and if so then move in.
The recent leaders in the NYSE large caps were not as powerful as we wanted to see. AXP showed great strength, MCD looked good off the 20 day MA. AES and other utilities jumped nicely. Some toyed with bouncing but were not terribly convincing, e.g. VZ, PG. Still others did nothing e.g. the drugs (JNJ, LLY).
The big name NASDAQ were very mixed. AMZN rode the Black Friday sales positives higher on decently strong volume. Not bad, but a lot of other big names that were the last rally's leaders failed to really make convincing moves. Not necessarily a surprise, but typically these get bids again as many try to play the last move yet again.
The big news of course were strong Black Friday weekend sales and what looked like a strong following Monday. The economy is not dead yet, but as noted before, sales are the same as jobs in terms of predictive nature: they are both lagging as they are both lagging indicators. Thus, while they may be buying now, they may regret it in Q1.
That said, that also means the Fed has the cover to stay the course with the December rate hike as it can point to the strong retail season. Definitely good to see strong sales -- helped by a continuing drop in oil and thus gasoline prices -- but if the market is worried about an overactive Federal Reserve, that is the kind of data that plays into the Fed's hands.
The rest of the news flow was rehash of the same stories:
Italy softened its position regarding the EU debt structuring and budget, giving some false hope all will be well in the EU.
A Brexit deal is purportedly in place, also alleviating some of the recent angst and stress as it is fish or cut bait time.
GM is closing a plant in Ontario, Canada, raising the President's ire, but of course this is a plant that makes sedans, an area GM has curtailed sharply because sedans don't make it any money. Thus, GM is criticized for being slow to make the changes needed to boost profitability, but when it does make the changes it is criticized by others for potentially turning thousands of employed into unemployed.
Trade and AAPL: Afterhours the President talked about his upcoming meeting with Xi at the G-20 summit, stating he felt he could reach a deal with Xi, but he was not sure that Xi was in a position to act on the points that are the most important to the US, e.g. IP theft. If not, the President casually tossed out, he could always increase the tariffs. SPY futures fell on the news as did AAPL, dropping back to just below where it started the day, giving up the day's 1.35% move and a bit more.
Upside gaps and rallies with one of the main features being that the sellers perhaps tried a bit midmorning to midday, but failed and the market rallied in in the afternoon session.
Another interesting feature is that pretty much everyone views this as a bear market where you can have a bounce but the bounce is only fool's money, at least if you are playing for new highs in the indices. Hey, we feel that any bounce has to prove it can make new highs and frankly we don't believe they can. Still, you play what the market presents. A second selloff, matching and surpassing the prior closing lows. Bullish advisors fell into the 30% range. MACD holding higher on this leg lower. Leading stocks holding near support while other areas show upside recovery patterns (China, chips, software) that could provide a boost. Lots of bear market gloom that is perhaps overlooking the bounce indications right in front of it. Note: still calling any upside a bounce in selling until it can prove otherwise.
DJ30: A Friday close below the October low with higher MACD. That shows some upside momentum developed, and Monday a gap upside and a rally to close near the session high. Not huge trade, still below average, but at least it topped the Wednesday pre-holiday level. Not a lot to hang the hat on, not a lot of big moves outside of AXP, but enough positive moves for a good Dow gain.
SP500: also closed below the October low Friday, gapping upside and rallying Monday on near average volume. Closed close to the session high and inside the gap zone from the prior Tuesday. MACD was higher on this test of the October low, indicating the upside momentum that showed itself Monday. Okay, a start higher from an oversold test of the prior low.
NASDAQ: Last week NASDAQ undercut the closing an intraday lows from October, landing on the 2016 up trendline. MACD nicely higher, showing that positive divergence. NASDAQ bounced then faded again Friday. Monday a gap back through last week's downside gap. Volume rather paltry even with the FAANG members all showing at least average volume. But, we are not looking at a move to new highs, right? Thus lower volume is not the bane it typically would be.
SOX: Never undercut any of the October lows before rebounding. The Monday move was not blowout, gapping upside through the 10 day EMA, testing and recovering, remaining below the 20 day EMA the entire session. The pattern mimics many of the better positions in the sector, i.e., coming off the low and setting up a pattern that can rally decently.
RUTX: The small caps never undercut the October lows either, but they still put in a decent double bottom pattern and started higher Wednesday, continuing into Monday. Not a power move but it is enough that it made the bounce off the double bottom and is following.
SP400: Never came close to the October lows before moving up Wednesday off the Tuesday second leg low. Gapped upside Monday, rallied to close just below the 20 day EMA that held it in check mid-November. Okay, the lick log for the midcaps in their higher low trying to do more.
Drugs: Sluggish big names, some up and some down, most not moving much e.g. LLY, PFE, MRK, JNJ. Some smaller drugs and biotechs are interesting, e.g. XOMA, IMGN, ARRY.
Food: Not much movement Monday. PEP up modestly, KO still holding the 20 day EMA. MCD bounced from the 20 day EMA decently but not a surge. KR at the 50 day MA. GIS diving, POST unable to do anything after that surge just over a week back.
Telecom: VZ remains the king. It was up Monday but not really strong. If it continues it is a buy.
Software: DATA, VRSN posted good moves and we picked them up. Others were up but don't have impressive patterns, e.g. ADBE, FFIV, CRM. TTWO is just off its low but interesting, AVID looks great but is a pretty light volume stock.
China: BABA gapped over the 50 day MA. QIWI but in a solid move. SOHU looks good to move higher. CTRP and SINA could do the same along with ATHM and HTHT. BILI still looks nice.
Semiconductors: XLNX shot higher again. MCHP started but no volume. ENPH gapped on better trade. ON faded off the gap, but looks good if it rebounds. INTC trying to move off the 50 day MA. Still setting up.
FAANG: GOOG looks pretty decent but it is still in a trend lower form the 200 day SMA. AMZN gapped and rallied on almost average volume. Still a very iffy pattern. FB made it to the 10 day EMA but still mired in the downtrend. AAPL gapped upside after its straight drop, but it gave up its gains afterhours on the Trump comments. NFLX holding at its lower lows, NVDA gapped upside but for now, big deal.
Stats: +354.29 points (+1.46%) to close at 24640.24
Stats: +142.87 points (+2.06%) to close at 7081.85
Volume: 2.03B (+111.9%)
Up Volume: 1.58B (+1.067B)
Down Volume: 424.41M (-13.15M)
A/D and Hi/Lo: Advancers led 1.49 to 1
Previous Session: Advancers led 1.18 to 1
New Highs: 19 (-1)
New Lows: 122 (+40)
Stats: +40.89 points (+1.55%) to close at 2673.45
NYSE Volume: 850.253M (+96.41%)
Up Volume: 617.132M (+472.549M)
Down Volume: 221.107M (-66.945M)
A/D and Hi/Lo: Advancers led 1.74 to 1
Previous Session: Decliners led 1.24 to 1
New Highs: 14 (+10)
New Lows: 146 (-26)
VIX: 18.90; -2.62
VXN: 26.02; -1.91
VXO: 20.39; -3.37
Put/Call Ratio (CBOE): 0.96; -0.16
Bulls and Bears:
A significant drop in bulls below 40.00 with bears moving back up to 19.8, the recent range top. Bears remain reluctant to surge but bulls are doing a lot of the work for them by dropping into the thirties. This is getting closer to bounce-worthy numbers. Not new bull run numbers, but bounce-worthy.
Bulls: 39.6 versus 42.9
Bears: 19.8 versus 19.0
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: 39.6 versus 42.9
42.9 versus 42.5 versus 50.5 versus 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: 19.8 versus 19.0
19.0 versus 19.8 versus 19.8 versus 19.0 versus 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: 3.059% versus 3.048%. Faded to test the move through the 50 day EMA.
Historical: the last sub-2% rate was in November 2016 (1.867%). 3.048% versus 3.065% versus 3.074% versus 3.056% versus 3.065% versus 3.116% versus 3.127% versus 3.147% versus 3.186% versus 3.239% versus 3.228% versus 3.222% versus 3.201% versus 3.22% versus 3.146% versus 3.149% versus 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: 1.13325 versus 1.13380. Euro tried to rally, gave it all away.
Historical: 1.13380 versus 1.13829 versus 1.13818 versus 1.14484 versus 1.14172 versus 1.13308 versus 1.13264 versus 1.13124 versus 1.12348 versus 1.13475 versus 1.1364 versus 1.14329 versus 1.14228 versus 1.14090 versus 1.13881 versus 1.14019 versus 1.13394 versus 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
USD/JPY: 113.510 versus 112.972. Nice surge higher versus the yen and off the 50 day MA.
Historical: Last below 109 in June 2018: 112.972 versus 113.007 versus 113.077 versus 112.617 versus 112.831 versus 113.585 versus 113.576. Was at 110 three weeks back.
Oil: 51.63, +1.21. Okay, rebounded, but two really sharp declines (Tuesday and Friday) in the past four sessions. Not much upside solace from this move.
Gold: 1222.40, -0.80. Holding tight at the 50 day EMA in a lateral move.
Okay, the bounce started after the October low test, a test that saw a pretty much straight drop. MACD higher, bullish advisors below 40, tons of gloom. The mood was right.
Some decent patterns in the recent leadership, but outside of AXP, the moves were not lighting up the board.
Some other groups trying to assert themselves such as China, semiconductors, some software, perhaps some smaller drugs.
Again, we do not view this as a rally that results in new index highs. The conditions are right for a bounce. That bounce started, we picked up some well-situated stocks. We are looking at more from existing plays that we have not yet entered as well as some new plays that are showing very good action. Whoever moves first we are ready to pick up to play the bounce.
Have a great evening!
End part 1
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