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11/28/2018 Investment House Daily
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Investment House Daily Subscribers:
Targets hit: None issued
Entry alerts: AAPL; ABT; AMAT; BILI; GLUU; HD, NVAX; PEP; UA
Trailing stops: None issued
Stop alerts: None issued
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- Powell confirms the softer Fed tone and a rallying market really rallies
- Rather broad rally lifts all indices as growth helps the recovery.
- GDP same but not as solid, New Home Sales post a sharp drop.
- Still looking at some more positions to play the rest of this move, and a bit of an early test may provide that opportunity.
After a pause in the bounce from the test of the October low stocks started higher pre-Powell. When Powell's speech with his 'rates just below neutral' statement hit the wires, stocks shot higher and rallied all the way home. The statement was foreshadowed by Clarida's Tuesday speech that used the same language, but it was Powell's confirmation of those words that sealed the deal. The market now has a Fed that is near neutral and thus ending rate hikes. Indeed, I heard one Fed historian say that the Fed would even end its balance sheet unloading in July 2019. Wow, expecting a downturn I suppose.
The market was not worried about any negatives. The Fed is one of the big market obstacles (along with trade) and that was, more or less, removed today. In response, the stock indices surged higher, continuing that rally off the October low test.
SP500 61.62, 2.30%
NASDAQ 208.89, 2.95%
DJ30 617.70, 2.50%
NASDAQ 100 3.17%
VOLUME: NYSE +16%, NASDAQ +15%. Volume moved back up to average on both exchanges. Not huge trade, but definitely good enough for a yearend rally.
ADVANCE/DECLINE: NYSE 4.1:1, NASDAQ 3.6:1. Again, fairly broad.
The index charts show solid action -- sold bounce action. DJ30 has a classic fall double bottom, SP500 as well. NASDAQ and NASDAQ 100 are very similar adding an undercut on the second leg as an excellent shakeout move. All sported higher MACD lows on that second leg, that old momentum shift indicator I talked about last week. Nice.
SOX added upside as well though was very tame for SOX, showing less upside than even SP500. Typically its beta is at least 1.5 of the large cap indices. As it is, the index is up but still somewhat a question mark, not as strong as the large cap indices.
SP400 and RUTX both scored solid advances though the midcaps lagged the overall market. Interestingly, the midcaps never tested the October low while RUTX has a more classic double bottom. Still not leaders, but definitely following upside.
Leadership: Gains were rather broad with the 'Dow-type' stocks rallying (VZ was notably absent), tech/growth surging (software flying post-CRM), drugs flying, food strong, financials (yes, verily) strong, FAANG (AAPL, AMZN, GOOG) jumped, transports much improved -- the moves were pretty much across the board.
All clear? For a yearend rally no doubt. For new highs? Hmm. There is still the trade issue out there and the likelihood of no deal or a faux deal at the G-20 meeting between Trump and Xi. Heck, today the Chinese ambassador showed he read the headlines out of a history book, citing how trade issues can become real wars, etc., but he did not read the part about his government being a communist one and inherently flawed. He also did not read modern history about how China steals IP to make tech and economic gains. That has to change or there will be no agreements. Why agree with a thief? We have appeased the thief for decades and all the thief did was become more aggressive. Remember the line from 'Air Force One' when the President (Harrison Ford) says to the VP (Glenn Close) 'if you give a mouse a cookie . . .' and the VP answers 'it will want a glass of milk.' (borrowing from the children's book 'If you give a mouse a cookie'). China equals a case in point.
So, trade is still out there but the Fed is, according to the market and many pundits, off the table. We will see. You still cannot trust the Fed as long as it is in hiking mode. It would be a rarity if it stopped hiking in time.
But, for a yearend rally, the Fed's softening is just right. We picked up some nice positions on AAPL, UA, PEP, ABT, AMAT, etc. to go along with DATA, VRSN, AXP, CREE, MCD, XLNX, JNJ -- and there are still more to buy, particularly if we get just a bit of a pullback early Thursday (LRCX, VMW, ADBE, TEAM -- to mention a few).
There was some news out there other than Powell's 'near neutral' market jet fuel.
GDP Q3, 2nd: 3.5 vs 3.6 exp vs 3.5 1st
Consumption: 3.6 vs 3.9 exp vs 4.0 1st
Core PCE: 1.5
Business Investment: 2.5 vs 0.8 first vs 8.7% Q2
Inventories surged (2.27%), adding more to GDP this time as other areas waned. Specifically, inventories make up 65% of the bottom line number. That makes the quality of this report not as solid. A good report, just lighter on consumption, stronger on inventories, and that is rather classic indication of a bit of economic slowing even as GDP overall remained the same at 3.5%.
New Home Sales, October: -8.9% month/month, -12% year/year. Hefty drop as shown by the decline in mortgage applications, though the past week they bounced 5.3%.
Median price: fell to $309,700, -3.1% year/year. All indicators, including Case/Shiller, show a slowing in prices. That helps offset the surge in mortgage rates -- but just barely.
Stats: +108.49 points (+0.44%) to close at 24748.73
Stats: +0.85 points (+0.01%) to close at 7082.70
Volume: 2.07B (+1.97%)
Up Volume: 1.01B (-570M)
Down Volume: 1.04B (+615.59M)
A/D and Hi/Lo: Decliners led 1.94 to 1
Previous Session: Advancers led 1.49 to 1
New Highs: 14 (-5)
New Lows: 180 (+58)
Stats: +8.72 points (+0.33%) to close at 2682.17
NYSE Volume: 796.843M (-6.28%)
Up Volume: 355.589M (-261.542M)
Down Volume: 429.561M (+208.454M)
A/D and Hi/Lo: Decliners led 1.58 to 1
Previous Session: Advancers led 1.74 to 1
New Highs: 20 (+6)
New Lows: 233 (+87)
VIX: 19.02; +0.12
VXN: 24.73; -1.29
VXO: 21.12; +0.73
Put/Call Ratio (CBOE): 0.92; -0.04
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: 3.061% versus 3.058%. Bonds faded, yields bounced -- even as the Fed head softened his rate hike rhetoric.
Historical: the last sub-2% rate was in November 2016 (1.867%). 3.058% versus 3.059% versus 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: 1.13682 versus 1.12973. Euro jumped back up from a new rollover on Powell's 'put' talk.
Historical: 1.12973 versus 1.13325 versus 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: 113.559 versus 113.781. Jumped then faded to a loss after four sessions higher off the 50 day EMA.
Historical: Last below 109 in June 2018: 113.781 versus 113.510 versus 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: 50.29, -1.27. Surged with a gap higher, then fell to close at the Friday closing low on this selloff from October.
Gold: 1223.60, +10.20. Reversed the Tuesday break below the 50 day MA.
Definitely a solid session Wednesday with a steady move up pre-market, a move higher on the open, and an accelerating move to the close. Great. Good action. The bounce off the October low in a yearend move looks good.
We still want to buy into that move. It would be great if, after such a strong move, there is some give back Thursday. Often you get that after these surges into the close. Not always in this kind of yearend, relief rally move. Thus, we were buying early and late.
Still, we look for a softer open that bottoms, then we can pick up more positions to play this move. There are still many stocks not overbought (unlike, say, DATA), and on a soft open or test we want to use that to pick up positions that are not overdone, can move with rapidity, and have plenty of clear space to run. TEAM, LRCX, VMW -- they are still out there and there is still time in this yearend move.
Have a great evening!
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