Monday, December 03, 2018

The Daily, Part 1, 12-3-18

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12/1/2018 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: None issued
Entry alerts: AUDC
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.

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- Obviously a deal to make a deal was not built into stock prices.
- SP500, DJ30 gap over resistance as all indices move higher on top of last week's solid move.
- Yearend rally has momentum but need a test to get better entries.

Over the weekend I posited that a trade 'deal' such as the one agreed to Saturday night between China and the US was priced into the market after a week's gains and word Friday that seemed to assure some type of deal. You would think that would be the case, particularly with the kind of deal reached, i.e. a deal to try and make a deal. Oh sure there is reportedly an agreement for China to buy more agricultural products and Trump says China will end tariffs on US vehicles. That is nothing new, however, as this kind of deal making in the past produced a goose egg.

Quite obviously, however, the news was not priced in. Futures jumped 400+ points higher Sunday morning and when the early Monday session opened they were up around 400. Not so priced in after all.

Futures held the same range all morning, and when stocks opened of course stocks gapped higher. The open, however, was the zenith. The indices sold back into midday and RUTX and SP400 even turned negative. Perhaps the November ISM at 59.3 (57.7 prior) showed too much strength on the heels of the Fed saying it was close to neutral. Heaven forbid any economic positives give the Fed a reason to keep hiking. An afternoon bounce regained some of the fade, leaving the indices mostly showing doji.

SP500 30.20, 1.09%
NASDAQ 110.97, 1.51%
DJ30 287.97, 1.13%
SP400 0.89%
RUTX 1.02%
SOX 2.67%
NASDAQ 100 1.68%

VOLUME: NYSE -35%, NASDAQ +3%. NASDAQ trade faded back to average as the index gapped big. Volume has been decent on the big upside days, not this one -- more reason for a test. NYSE volume tanked back to just above average on a gap over the 200 day SMA. Not bad, not huge trade.

ADVANCE/DECLINE: NYSE 2.8:1, NASDAQ 1.9:1. Frankly, breadth was hardly commensurate with the price moves.

After a week of upside, a gap that failed to advance is not that surprising. The indices had rallied to resistance and the trade news gapped them through that resistance. Sitting on top of a solid gain and then gapping higher over resistance begs a test of that resistance. That the indices peaked at the open and faded from there suggests a quick test is coming. Thus, we were not chasing this move as we may get better opportunities on a test. That does not mean the yearend move is over at all. Just that a lot of good news was built in, more good news came out and gapped stocks, and after a test, they are ready to move again.

We did pick up AUDC as it posted a solid upside break -- not a big gap -- that held the move on good volume. Most other plays gapped to doji or gapped away. We will see if they test and set up better entries for a continuation of the yearend rally.



DJ30: Gapped over the 50 day SMA touching near some resistance at 26,000. Faded to a doji. DJ30 is now just below the early November hump high at 26,775, over the 50 day SMA. Good place for it to form a handle with that lateral move we were looking to continue Friday and then continue the yearend move. Good place to do it, but will it? Would like that because then we get a chance at entering some more positions.

SP500: Gapped over the 200 day and 50 day SMA to a doji. Also just below the early November double bottom hump. As with DJ30, we will see if SP500 can set up a handle and then resume the yearend rally.

NASDAQ: Not a doji, but NASDAQ gapped to just below the 200 day SMA and faded to close just over the 50 day EMA. As with the other large cap indices, that gets NASDAQ near the early November high, but it is also below some key resistance at the 200 day SMA. 7 sessions mostly upside off that mid-November low and at resistance, a likely place to take a break, especially after so much good news is built in.

SOX: Gapped over the 50 day MA's to a doji, clearing the early November high. Not really a double bottom as the other index patterns, but an effective move. SOX is now at the lower gap point from the early October gap lower. Serious resistance at 1300ish (closed at 1273).

SP400: Gapped over the 50 day MA's, sold off to turn negative, but then recovered decently to hold the 50 day MA's. Right at the early November highs, not a great pattern, but it is working through it.

RUTX: Gapped higher, rallied, but also turned negative intraday. Still below the 50 day MA's and still well below the early November high. Following.


Drugs: After a strong week faded modestly Monday. Modest declines: MRK, LLY, PFE. ILMN was strong, gapping and rallying; too strong as it gapped away from our entry. Obviously still a solid group.

China: As you would expect, a pretty solid session but not blowout. BABA gapped to 168+ but closed near 164, still up 1.8%. HTHT gapped and rallied to near the 200 day SMA in a huge move. SOHU gapped out of its range over the 50 day MA. ATHM gapped and rallied to the 200 day SMA. Not bad moves. BILI gapped but flubbed it.

Food: Spoiled some. After Friday's nice moves, many dropped sharply back to near support. It looked as if there was some money moving out of this more defensive sector. Will have to see how it acts after Monday. Some rebounded, some did not. KO rebounded, PEP cut some of the losses, MCD fell to just below the 10 day EMA, at least on lower trade. MKC spiced to the upside again. CMG held the 10 day EMA with a doji with tail.

Software: DATA gapped to a hangman doji after almost 2 weeks upside. CRM gapped higher, faded. VMW gapped higher faded to a loss. TEAM continued upside with another strong move. MSFT gapped, tested, recovered decently. Overall still a solid group.

Transports: Moved higher initially, faded. The rails were good at that, e.g. NSC, KSU, CSX. Airlines lost a bit of ground, e.g. DAL. Truckers struggled lower, e.g. JBHT, WERN.

Retail: Very mixed action but right now a lackluster group. AMZN gapped over the 200 day SMA and both 50 day MA's. COST, BBY, WSM posted gains from blah patterns.

Chips: Gapped upside for the most part to some very solid moves. AMAT gapped to a doji though a 2.8% gain. AMD gapped sharply higher and rallied to the 50 day SMA. XLNX continued higher with a gap to a doji. LRCX the same.

Telecom: VZ was downgraded and did not fare well, undercutting the 20 day EMA. AUDC posted a nice break higher off the 50 day MA.

SCAANN: AAPL gapped upside through the 10 day EMA. NVDA gapped up to the 20 day EMA but still looks treacherous. GOOG gapped just over the 200 day SMA then faded to close below it.


Stats: +287.97 points (+1.13%) to close at 25826.43

Stats: +110.98 points (+1.51%) to close at 7441.51
Volume: 2.62B (+3.15%)

Up Volume: 2.02B (+530M)
Down Volume: 580.95M (-439.05M)

A/D and Hi/Lo: Advancers led 1.88 to 1
Previous Session: Advancers led 1.24 to 1

New Highs: 75 (+24)
New Lows: 94 (-25)

Stats: +30.20 points (+1.09%) to close at 2790.37
NYSE Volume: 981.134M (-34.99%)

Up Volume: 746.555M (-123.749M)
Down Volume: 227.491M (-397.283M)

A/D and Hi/Lo: Advancers led 2.78 to 1
Previous Session: Advancers led 1.18 to 1

New Highs: 76 (+19)
New Lows: 128 (-131)


VIX: 16.44; -1.63
VXN: 21.70; -2.32
VXO: 17.87; -2.88

Put/Call Ratio (CBOE): 0.76; 0.00

Bulls and Bears:

A second week below 40 as bulls slide a bit more in what is a precipitous drop. Maybe not into the low thirties, but the magnitude and angle of decline was enough to contribute to the bounce. Bears move over 20 for the first time since early 2018. Significant as well.

Bulls: 38.3 versus 39.6

Bears: 20.6 versus 19.8

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: 38.3 versus 39.6
39.6 versus 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: 20.6 versus 19.8
19.8 versus 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: 2.979% versus 2.993%. Broke higher off the 50 day MA consolidation.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.993% versus 3.032% versus 3.061% versus 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: 1.13360 versus 1.13199.

Historical: 1.13199 versus 1.13934 versus 1.13682 versus 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

USD/JPY: 113.581 versus 113.474

Historical: Last below 109 in June 2018: 113.474 versus 113.402 versus 113.559 versus 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: 52.95, +2.02. Gapped higher and closed over the 10 day EMA for the first time in 8 weeks.

Gold: 1233.90, +13.70. Strong break higher off the two week consolidation at the 50 day MA.


Okay, more good news on top of the Friday good news and stocks gapped upside. No issue with the upside move driving positions higher, though some money moved out of recent leaders such as the food group. Does that represent a change in investor appetite back to growth sectors and out of the more defensive stocks? Could be; we will see how that Monday rattle in those sectors dies down or not. Could be it simply sets up some new buys.

Still tougher to enter after the move at this point then topped with the upside gap Monday. again, a great time for the growth stocks to pause and set up the next leg of the yearend rally.

Have a great evening!

End part 1
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