Thursday, December 06, 2018

The Daily, Part 1 of 3, 12-6-18

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12/6/2018 Investment House Daily
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Market Closed Wednesday

Investment House Daily Subscribers:


Targets hit: None issued
Entry alerts: CRMD
Trailing stops: None issued
Stop alerts: ON

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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.


- Selling resumes as market gaps lower, then a recovery.
- Impressive point swings underscore the continued indecision.
- Trade, Fed, economy blamed for the selling, WSJ Fed story credited with the rebound.
- Walks like a trading range, talks like one . . . so a bounce off the bottom.

Another day, another 1492 round trip on DJ30. 140 on SP500. 345 on NASDAQ. Volatility? Certainly appears to be the case. Even VIX jumped to 25.94 on the high before the rebound. Of course, that means VIX remained in the range, still below both October spikes.

SP500 -4.11, -0.15%
NASDAQ 29.83, 0.42%
DJ30 -79.40, -0.32%
SP400 -0.50%
RUTX -0.22%
SOX -0.54%
NASDAQ 100 0.64%

VOLUME: NYSE +13%, NASDAQ +8%. A solid move higher for volume on both exchanges. NASDAQ trade moved up to late October/early November selloff then bounce levels. NYSE showed similar trade levels. Good volume though not blowout reversal volume as Art Cashen noted. Good enough, however, to launch rebounds as seen in late October/early November.


NEW LOWS: NYSE 648, NASDAQ 465. That is extreme enough for a bounce.

The catalysts? Downside was the slurry consisting of trade (Huawie CFO arrested for the US, casting a pall on the hopes of trade deal), economics (ADP saying perhaps the jobs market has peaked), and interest rates (Fed rate hiking, curve inversions). That was good for 785 points lower on DJ30, testing the early November and October low. SP500 tested those levels as well. SP400, RUTX also.

Upside was a WSJ report suggesting that after a December hike the Fed would adopt a wait and see attitude. How different from what anyone else has said of late. But, it WAS in the WSJ so it must be the truth.

Was it really the WSJ? As good a reason as any for a market that runs upside and downside in yo-yo like fashion. That said, if anyone believes that because the WSJ put its seal of approval on the 'one in December and done (or at least data dependent)' put in a bottom, that would be a problematic choice. As noted, volume was not a stampede as Art Cashen commented, and that mitigates any claim for new highs off this action.

Okay, perhaps not new highs. Perhaps a trading range of sorts? Third test of the same level, third bounce.

Further, NASDAQ is showing a 7 week inverted head and shoulders. Good pattern for a bounce.

That is the market we have. Nontraditional.


To view, click on the following links:

That said, the back and forth holding support is trading range-like. NASDAQ has held 6900 to 7000 on the lows, bounced to 7500ish on the highs. SP500 holding 2625 on the lows, bouncing to 2800ish. DJ30 24,000 on the lows, 26,000 highs. Three tops, three bottoms in those ranges. Trading range.

The thing about trading ranges is they don't last forever. Four to five rotations are typical, then a breakout or a breakdown.

That makes sense when you think about it. So much indecision about trade, Fed, economy/yield curve. Trading range material. Fed may go on pause. Economy showing mixed signals. Parts of the yield curve inverted but not the 2 year/10 year. Again, trading range material.

That says a rebound to those levels, given the sharp reversals off the range support. Therefore as we saw positions and many stocks hold support and bounce, we let them bounce. We pick up some more positions for a quick trade higher back up to those levels. Some of the leaders before the bounce (e.g. drugs, food) are in position to bounce up off the tests. Some of the growth leaders reversed off support as well, e.g. software. Those are the potential plays.

Software: TEAM, VMW, VRSN, ZS (yes, we have some positions on these already).

Drugs: LLY, PFE, CRMD (entered today), ZGNX, BCRX


Telecom: VZ, AUDC

These are a few that remain in solid patterns even after this most recent selling episode. There are surely more and we are looking for them.

These are upside bounce plays, not runs to new highs in the indices. When the indices get near the magic numbers as resistance and cannot blow through that is the time to bank gains. Then you see how the market reacts to that resistance and make the next plays based upon that. Remember, typically 4 to 5 rotations in a range and then a breakout or a breakdown, another factor to keep in mind as the indices approach that resistance.


Stats: -79.40 points (-0.32%) to close at 24947.67

Stats: +29.83 points (+0.42%) to close at 7188.26
Volume: 2.85B (+7.95%)

Up Volume: 1.63B (+1.31B)
Down Volume: 1.18B (-1.12B)

A/D and Hi/Lo: Decliners led 1.6 to 1
Previous Session: Decliners led 5.99 to 1

New Highs: 9 (-30)
New Lows: 465 (+210)

Stats: -4.11 points (-0.15%) to close at 2695.95
NYSE Volume: 1.279B (+13.42%)

Up Volume: 463.411M (+389.634M)
Down Volume: 804.732M (-247.004M)

A/D and Hi/Lo: Decliners led 1.58 to 1
Previous Session: Decliners led 5.11 to 1

New Highs: 35 (-40)
New Lows: 648 (+275)


VIX: 21.19; +0.45
VXN: 25.97; +0.59
VXO: 23.53; +0.57

Put/Call Ratio (CBOE): 1.08; +0.13

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: 2.892% versus 2.915%. Bonds continued to rally, but TLT, after moving up through 200 day SMA, faded to close below it. Impressive surge out of the double bottom with handle pattern formed October through November.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.915% versus 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: 1.1376 versus 1.13970.

Historical: 1.13970 versus 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: 112.71, +0.05. Hanging on near the 50 day MA.

Historical: Last below 109 in June 2018: 112.813 versus 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: 51.49, -1.76. After bouncing through Tuesday, sold off Thursday back below the 10 day EMA.

Gold: 1238.10, -3.00. Backing off some after a strong move Monday and Tuesday to the late October/early November high.

End part 1
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