Tuesday, December 04, 2018

The Daily, Part 1 of 2, 12-4-18

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12/4/2018 Investment House Daily
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Market Closed Wednesday

Investment House Daily Subscribers:


Targets hit: None issued
Entry alerts: None issued
Trailing stops: AAPL; NVAX
Stop alerts: ABT; AXP BILI

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The REPORT SCHEDULE is as follows:

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.

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

Access to all current videos will remain assessable each day using the play links in the reports.

If any market circumstances arise where we see additional plays we want to prepare for the next session, we will of course issue those plays regardless of the day of the week.


- After the rush to buy growth, a rush to sell growth.
- A soft open turns hard lower. Trump tweet, bond yield curve, CTA momentum chasing all blamed.
- Dow-type leaders, software, drugs, show relative strength so perhaps the same trends will hold post-Wednesday closure.
- Some potential character changing action Monday and Tuesday, so have to acknowledge things could get bad again.

What started out looking like the short test we wanted to see after a nice week-plus upside market move turned into a steep plunge.

Monday we noticed and discussed the strange trade in the stocks that led the market higher as the growth areas struggled and faded lower and lower. While they sold Monday, growth stocks surged.

Tuesday the market was softer at the open. Not bad at all leading up to midday, just a soft session ahead of a market closure, very normal after a strong upside move. Then the bottom dropped.

Trump tweeted he is a tariff guy or something to that effect. Mnuchin said it was going to be some work to get the trade deal done -- but he said it would be done. The bond yield curve is being cited as a reason for selling though the 2/10 year has not inverted, just the 2/5 and 3/5 year pairs. Not good news, but not necessarily a death blow to the economy.

When the bottom opened up, the move occurred at the same time a bunch of sales from managed futures funds (CTA's) hit. These momentum chasing plays only worsened when SP500 broke the 200 day SMA. That triggered a whole new round of selling and a whoosh lower that left the 200 day SMA way, way back in the rearview mirror.

At 1:30ET stocks started a rebound that moved to the start of the last hour. Then that died and stocks sold off to close just about at session lows.

SP500 -90.31, -3.24%
NASDAQ -283.08, -3.80%
DJ30 -799.36, -3.10%
SP400 -3.62%
RUTX -4.40%
SOX -4.98%
NASDAQ 100 -3.78%

VOLUME: NYSE +15%, well above average. NASDAQ +1%.

ADVANCE/DECLINE: NYSE -5.1:1, NASDAQ -6:1. Impressively negative.

As is evident, all indices were slammed. The Dow-type market leaders were sold again, but the focus was on growth as it was dumped just a day after it was pumped. AAPL was slaughtered as it was downgraded yet again, the issue being market saturation for its one product, the iPhone. Sure there are iPads and Macs, but they are drops in the bucket. Services is growing but it is not enough to make up the difference in some analysts' minds.

Thus, AAPL was pounded along with its suppliers such as CRUS which warned for its Q3 based upon . . . lessening demand for phones. QRVO, SWKS who supply AAPL sold off as well.

It was not just those AAPL stocks, however. LRCX, AMAT, AMD, INTC, MSFT, CSCO, AMZN, NVDA, GOOG and the like were hit with impressively large declines. While Monday I was concerned about a dramatic rotation from the trending leaders in the Dow stocks to growth, today's action seemed to belie that notion.

Interestingly, software was still relatively strong, e.g. DATA, off 2.93% despite a huge run the past two weeks. NOW was just fine at the 200 day SMA, VMW holding the 10 day EMA, ADBE at the 50 day EMA, VRSN at the 20 day EMA. Not bad looking at all. Definitely a lot worse in the market.

Drugs were also lower but again, relatively light compared to others. LLY, PFE, MRK, JNJ. ABT, however, dropped more than we wanted and we dumped it. We do like ZGNX, and if it continues looking as strong as it did then we want to grab it.

The recent leaders (that include drugs) fared decently after getting roughed up Monday. VZ held its ground. MCD did the same. PG, KO, PEP all held up well enough.

We could very well see this rectify itself post-Wednesday closure. There are still good patterns in the market leaders, and that is the way it has been. The same leaders show relative strength in the selling, and they could easily resume their moves. Thus we were not selling them today.

That said, you HAVE to acknowledge the trade this week is anomalous to the double bottom bounce, a rally to yearend, and the leadership of those food, drug and other Dow-type stocks that were a haven for money as growth sold. It may not be the case that the same pattern returns after the market closure. Inverted curve? Trade worries even though the sides are clearly closer then they were when the market was bouncing off the October low? Something else out there yet to be revealed?

Therefore, our focus is on the leaders pre-bounce from the October low. Those are still trending higher, still in good moves, not just bouncing in a relief move after an ugly selloff. Their action will tell you whether money is leaving. Sure, the NASDAQ growth stocks will be a part of that: if they don't move up as the Dow-type leaders move down, then you know money is simply, as Elvis once did, leaving the building.

Not a great session, but the midweek closure may have something to do with exacerbating what would have been normal test moves. When the CTA trading got involved, it got out of hand. Thus, we did not dump it all, leaving positions that were holding support, still looking good -- most positions, that is. If a bounce post-closure fails, then we likely have to take them off.

Have a great evening and Wednesday!



To view, click on the following links:


DJ30: Modest selling turned into a gutting, giving up the 50 day MA's and the 200 day SMA, back to 25,000, higher volume. Midpoint of the bounce, important level to hold.

SP500: After gapping over the 200 day SMA, SP500 crashes it and more, down to 2700 support. As with DJ30, an important level to hold.

NASDAQ: Gapped lower and sold back through the 20 day EMA. Closed below 7200 support. 7100 is next and a key level.

SOX: Sold below the 50 day MA, gapping lower from the Wednesday doji gap. Some support at 1220 (1209 close), so at a level it needs to start holding as well.

SP400: Bombed lower, nearing the recent November low where it bounced. Failed at the early November high, how we see if it can hold from 1820 to 1800.

RUTX: Utter collapse, nearly at the prior lows.


Stats: -799.36 points (-3.10%) to close at 25027.07

Stats: -283.09 points (-3.80%) to close at 7158.43
Volume: 2.64B (+0.76%)

Up Volume: 319.79M (-1.7B)
Down Volume: 2.3B (+1.719B)

A/D and Hi/Lo: Decliners led 5.99 to 1
Previous Session: Advancers led 1.88 to 1

New Highs: 39 (-36)
New Lows: 255 (+161)

Stats: -90.31 points (-3.24%) to close at 2700.06
NYSE Volume: 1.128B (+14.92%)

Up Volume: 73.778M (-672.778M)
Down Volume: 1.052B (+824.246M)

A/D and Hi/Lo: Decliners led 5.11 to 1
Previous Session: Advancers led 2.78 to 1

New Highs: 75 (-1)
New Lows: 373 (+245)


VIX: 20.74; +4.30
VXN: 25.38; +3.68
VXO: 22.96; +5.09

Put/Call Ratio (CBOE): 0.95; +0.19

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: 2.915% versus 2.979%

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.979% versus 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: 1.13970 versus 1.13360

Historical: 1.13360 versus 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: 112.813 versus 113.581

Historical: Last below 109 in June 2018: 113.581 versus 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: 53.25, +0.30.

Gold: 1246.60, +12.70


Market closed for President George H. W. Bush's funeral.

End part 1 of 2
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