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11/8/2018 Investment House Daily
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Investment House Daily Subscribers:
Targets hit: JNJ
Entry alerts: V
Trailing stops: ULTA (then it bottomed and shot higher; argh)
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.
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- Bears come out as the market is a bit soft the day after a follow through.
- Gartmann calls to short the move higher, but that is not really contrary to a rally to yearend.
- Fed keeps the same agenda. Surprise.
- Lower trade, narrow breadth, very minor -- overall -- losses. Sure looks like the follow through is simply taking a pause.
The day after blues. Stocks surged Wednesday post-election then nursed a hangover Thursday. Futures were lower, then stocks moved higher pre-Fed, only to sell back down after the Fed held firm on its hiking schedule and its commitment to short statements. A late bounce helped some though the indices closed lower -- outside of the still leading DJ30.
SP500 -7.06, -0.25%
NASDAQ -39.87, -0.53%
DJ30 10.92, 0.04%
NASDAQ 100 -0.62%
VOLUME: NYSE -7%, NASDAQ -8%. Good to see volume back off on a bit of weakness.
ADVANCE/DECLINE: NYSE -1.1:1, NASDAQ -1.2:1. Very narrow here as well, showing no negatives.
Of course some were out saying Wednesday was a blip, that stocks would certainly roll back over as evidenced by the Thursday early weakness. Gartmann said to sell this bounce, again convinced a bear market is upon us. Okay, perhaps he is right this time: sell after the bounce. That is wholly consistent with the idea that a follow through put in place Wednesday can lead to a year end rally then fall back over in early 2019.
Thing is, a rally to year end is a great upside opportunity to make money, and then IF the market move stalls and rolls over, a time to make money downside.
Thursday, however, played into the hands of the bear calls as the market could not continue the upside move. Looking at the charts, however, this looks to be very much just a pause after a hard day upside: minor losses, lower volume. You can get a few soft sessions after a follow through and have no issue still moving higher. As of Thursday, this looked to be the case, i.e. just a pause after a solid move higher.
Did the Fed play into the action with its no-hike decision where it noted the slowdown in corporate investment on the one hand but strong consumer spending on the other? Yes and now; perhaps the market wanted something more given the recent October selling, but the Fed did not mention this as it said it would stick to its gradual hiking new game plan. A bit of disappointment but no harsh selloff by any stretch.
The discussion of whether the Fed is going too far or not is a strange one when you listen to the arguments for or against a rate hike. One curious one I heard today was from someone who has staunchly criticized the Fed's game plan change in its hiking. Today he said that, while the Fed needs to stop its hiking to prevent a recession, he still would like to see one more hike in December to "ensure no inflation" arises.
That is utter BS. If the economy is slowing, don't hike because you will only slow it further. Moreover, as the economy slows inflation starts to show up. Why? Because the supply side that provides the goods slows -- output slows. Demand lags because jobs and wages lag. Thus, while supply tails off demand remains stronger due to the lag effect. That sparks inflation: the same or more money chasing lower supply. We know that capital investment is down -- the Fed noted it today. But, the Fed does not look at the supply side -- it is a demand side argument for them as they bow to the Phillips Curve. Thus, the Fed hikes in to slowing supply, and the inflation it tries to prevent occurs -- unless it initiates a full blown recession. Indeed, that is what it has to do to tamp out the inflation, the inflation it started. Its models say 'slow down the economy to avoid inflation,' when instead encouraging increased supply would sold the problem: more or the same level of goods to meet the same demand.
Summary: All in all, this action simply looks like a day off after a mad rush higher post-election that blew off some anxiety and flat trade ahead of the election results. After a day or two or three off we could be in for a new leg higher. Moreover, that action would set up some more plays quite nicely for a year end run.
To view, click on the following links:
DJ30 actually closed positive on the day though off the high. After the strong day Wednesday, this was a pause on lower trade. DJ30 is up 4 straight days; a bit of a rest is normal.
SP500 broke the 50 day EMA Wednesday and sat on it Thursday with a tight doji on lower trade. Not bad action at all, and a day or two should give it the strength to continue.
NASDAQ also showed a doji after a strong gap and run, sitting on the 200 day SMA and just below the 50 day EMA. Good break higher as a follow through, and after a pause we will see if the breakout from the inverted head and shoulders can continue.
SP400 showed a doji just below the 50 day EMA. That puts it at the neckline of a possible head and shoulders. Thing is, it still has to work on the right shoulder; lagging the other indices yet again.
RUTX shows the same pattern as SP400, at the neckline, still a shoulder to form.
SOX tested the 20 day EMA on the low, recovered decently. More work on its right shoulder to its inverted head and shoulders pattern. As the large cap indices test a bit more after the surge, SOX has the time to finish the pattern.
Even with a slow pre-market and open, some of the stocks recovering from the selling flirted with the buy points. Overall they struggled to hold though we did pick up a position on V. Some wild moves really got us worked up in the office -- e.g. ULTA with its flop lower then surge back upside. Anyway, not a big move higher of course, but stocks had another day to put in some more time on their patterns.
SCAANN: SQ broke higher ahead of earnings then sold on the results. Managed to hold some support at 75 so will see if it gets the bounce post-earnings. CRM showed low volume on a flat day; still looks promising. AAPL faded some off the Wednesday move, but the pattern is still weak. AMZN showed a doji after the big Wednesday move. NFLX fell back from its move. NVDA broke lower and looks weak.
FB faded; pattern is not so great now but will watch it. GOOG sold modestly, still looks good to continue higher.
Software: TTWO posted good earnings, but after trading at 132 afterhours Wednesday it imploded to 119. FEYE added some more upside but was off a surge on the day. VMW solid, up another session. DATA tested a bit; a bit more testing is a better entry. ADBE faded modestly; a short test is not bad. VRSN looks quite good still as it comes off its test of the earnings surge. MSFT showed a doji off the Wednesday surge. A few days testing can set up a new break higher.
Retail: WMT up again. TGT, DG up as well. WSM edged higher, ULTA gapped lower, sold, then surged. LOW broke nicely higher.
Financial: V worked well enough. BAC surged, JPM as well. C was a dog.
Food: MCD still rallying; impressive. KR took a day off. MKC still spicing things ups. KO off a bit, PEP still moving higher.
Stats: +10.92 points (+0.04%) to close at 26191.22
Stats: -39.87 points (-0.53%) to close at 7530.88
Volume: 2.46B (-8.21%)
Up Volume: 998.7M (-861.3M)
Down Volume: 1.43B (+657.96M)
A/D and Hi/Lo: Decliners led 1.17 to 1
Previous Session: Advancers led 2.32 to 1
New Highs: 75 (+12)
New Lows: 91 (+13)
Stats: -7.06 points (-0.25%) to close at 2806.83
NYSE Volume: 823.036M (-6.85%)
Up Volume: 291.036M (-376.908M)
Down Volume: 525.905M (+318.879M)
A/D and Hi/Lo: Decliners led 1.12 to 1
Previous Session: Advancers led 3.11 to 1
New Highs: 75 (-5)
New Lows: 68 (+17)
VIX: 16.72; +0.36
VXN: 22.86; +0.47
VXO: 16.91; +0.19
Put/Call Ratio (CBOE): 0.97; +0.01
Bulls and Bears:
This now gets at least interesting. Bulls tumbled 6.2 points, now well below 50. Perhaps that is the dam breaking and negative sentiment will ramp. It is noteworthy that the market rebounded in the aftermath. Bears mad a significant move, at least for the bears.
Bulls: 44.3 versus 50.5
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: 44.3 versus 50.5
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 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: 3.239% versus 3.228%
Historical: the last sub-2% rate was in November 2016 (1.867%). 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: 1.1364 versus 1.14329. Euro broke sharply lower.
Historical: 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 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
USD/JPY: 114.01 versus 113.641. Dollar rallied back up near the late September high.
Historical: Last below 109 in June 2018: 113.641 versus 113.419 versus 113.244 versus 113.204 versus 112.81 versus 112.877 versus 112.876 versus 112.58 versus 111.89 versus 112.391 versus 112.091 versus 112.427 versus 112.680 versus 112.527 versus 112.385 versus 112.553 versus 112.558 versus 111.848 versus 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
Oil: 60.67, -0.90. Still plunging lower. Too much oil, not enough economies on earth good enough to use it all.
Gold: 1225.10, -3.60. Still in an orderly 50 day EMA test after moving higher early October. Gold should be weak if the Fed is right.
After a day off from the follow through, will stocks continue higher or take another day off? The latter would be lovely, let patterns set up more, then deliver a new upside move next week. May not wait, and if not, we will look at some of those plays put on the report Wednesday and earlier in the week.
That said, stocks such as NVDA, HRS do not look good at all. Of course, not every group, every stock will get the money. MSFT looks interesting with its Wednesday gap and rally and the Thursday doji. AVGO posted a strong move Thursday, breaking through the 200 day SMA. A bit too much too quick, but on a test it could provide an entry. ENPH is similar.
There are opportunities, and we plan on getting into more when the Wednesday follow through move resumes, preferably next week.
Have a great evening!
Good breaks higher by the indices and many growth stocks out of 5-week inverted head and shoulders patterns as some pent up election anxiety was released on the split the baby kind of results.
If the moves continue, there are some we want to enter. It could be that after such a sharp release of anxiety with buying results in a bit of a give back, a bit of a pause, after the move. If that occurs we can use that as an entry. If the moves continue, however, we are not going to balk at moving into some of these stocks that started a pretty solid break upside.
Then we see if the moves can continue and if this is the start of the rally to year end. It certainly has the earmarks with the follow through session and some very decent patterns capable of delivering a move to yearend, a very tradeable move at that.
Have a great evening!
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