Tuesday, May 21, 2019

Market Alert - CORRECTION CRM

Alert sent early. NOT entering yet.
______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com

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Market Alert - PreMarket

Futures vs FV: SP +17.32; DJ +153.10; NASDAQ +58.55

Futures started higher in the last hour Monday, continued to edge higher in afterhours trade, and jumped more starting 5:00ET on word that the Administration is easing the Huawei ban until 8/19 for specific items. Futures hit a peak at 7:00ET, faded, rebounded to match those levels with DJ30 up near 200. As the open has neared, however, futures are backing off.

Trade: Huawei easing deals with maintaining existing broadband networks and security updates for existing handsets. As a result, GOOG lifted its restrictions, retying the ties that were severed Monday. The chip stocks most directly involved (SWKS, AVGO, TXN, XLNX et al) are rebounding 2% or so. This is likely just a temporary fix; it does not solve the trade impasse, but hope springs eternal and some see it as an easing to try and keep negotiations going. No. This is a practical adjustment to keep people in the US from losing services.

Yuan is near 7.0, deemed a critical level by those claiming to be experts. Below this level Chinese asset prices fall.

BA: China Eastern airline asks BA for compensation for grounded 737 Max planes. You knew this was coming.

South Korea: Exports -11%, chip exports -33%.

AVGO: Under investigation in the US re chip sales. Kind of vague at this point but it does not look good.


Turkey: cuts interest rates as inflation surges. Of course the lira dives lower. Bizarre leader, bizarre policies, predictable results.


TSLA: MS says worst case scenario the stock is $10. Why not $1?


Earnings beats: HD; AZO

Misses: KSS (BL); JCP (BL)


BA: Jumps a bit on reports that a bird strike may have caused Ethiopian airline crash.


OTHER MARKETS
Bonds: 2.43% vs 2.416% 10 year

EUR/USD: 1.1156, -0.0014

USD/JPY: 110.50, +0.46

Oil: 63.35, +0.25

Gold: 1271.50, -5.80


Futures have backed off the highs considerably. The steady rise from the Monday close suggests a steady bid, but commentators are stating this rise is false, it is driven by an adjustment in strategy that is nothing more than a temporary adjustment to again give those providing products and services to switch to other providers.

That is the message US companies need to take to heart: get out of China. There will be no deal that really is a deal unless China is on the verge of economic collapse and it capitulates just to survive. Again, the message, as the house in Amityville Horror said, is 'get out!'

Near term the chips are jumping on the policy adjustment. We have downside on SWKS and AVGO and AAPL. Will have to see how they react at the stop points. This could be a short-lived event but we don't want to get in a protracted test.

New positions? The market was getting oversold and prepping for a bounce -- talked about that last night. The Huawei adjustment is acting as a trigger for that bounce. Stocks that remained in good position are candidates and we put some more of those on the report last night: they held up in the selling, kept their patterns, and thus are solid candidates to play upside.

______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com

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Monday, May 20, 2019

The Daily, Part 1, 5-20-19

* * * *
5/20/2019 Investment House Daily
* * * *

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MARKET ALERTS:

Targets hit: AVGO
Entry alerts: None issued
Trailing stops: None issued
Stop alerts: AMAT

The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
https://www.investmenthouse.com/alertdaily.html

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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.


MARKET SUMMARY

- Growth hit as tech companies have to cut off Huawei
- All indices gap lower, SOX gaps to the next level as NASDAQ approaches next potential support.
- Fed again thinking it is smarter than the markets.
- Fighting a trade war is the result of failed central bank policies, the same failed policies it used to cause other catastrophes.
- Chips are so ugly they may be ready to bounce already.
- With the distribution, any bounce is just a bounce. Still.

The Wednesday and Thursday bounce that stalled Friday turned back into selling Monday, the same as the prior week. I suppose you could say the market is showing a series of 'gray Mondays.' In any event gaps lower across the board for the stock indices, but growth clearly got the worst of it.

SP500 -19.30, -0.67%
NASDAQ -113.90, -1.46%
DJ30 -84.10, -0.33%
SP400 -0.73%
RUTX -0.70%
SOX -4.02%
NASDAQ 100 -1.69%

VOLUME: NYSE -11%, NASDAQ -2%. NYSE trade fell well below average, further indication the selling was not that heavy or aggressive on SP500 and DJ30. NASDAQ trade remained above average, still showing overall aggressive selling.

ADVANCE/DECLINE: NYSE -2:1, NASDAQ -1.8:1. Large cap tech selling for the most part.


Tech was the focus once again as trade issues remain front burner. As a result of the black listing of Huawei, several US companies cut ties. GOOG cut licenses to Android while INTC pulled its products as well. NKE and other shoe makers are complaining they cannot move fast enough, that shoes are different from 'apparel,' and that the year for them was not enough to relocate production.

China hinted at retaliation with rare earths, something that could bite. We all knew China was buying up and locking down all the rare earths it could over the past 15 years. Saving for a rainy day I supposed. Thus, China said it was in 'no rush' to resume the trade talks. What did the US do in that 15 years? Not much. Printed several trillion dollars at the Fed.

Speaking of the Fed, the Atlanta Fed governor said he wasn't sure what the market was looking at because he certainly did not see a rate cut in 2019. Ah, a member of the Fed who knows more than the markets. Danger, danger, danger. But then again, that is why the Fed is ALWAYS wrong: it is a small group of people who think they know more than markets. Or not. They likely just are there to keep the status quo, i.e. the super rich super rich.

GS said a tariff on all Chinese goods would lop off 6% from corporate profits. I am assuming that was US corporate profits and GS was not worrying over Chinese profits.

You know, all this started in 2000. We are now paying the price for Greenspan's actions in starting the massive Fed put. Without going into too much detail yet again, Greenspan was convinced the 'runaway consumer' and high wages would trigger inflation in our strong economy that was still riding the 20 year boom. Well, he ended up draining all liquidity from the economy after flooding it with liquidity ahead of the Y2K non-event. On top of that he aggressively hiked rates. Indeed, after NASDAQ had rolled over violently he added another 50BP rate hike.

Wow, talk about history repeating. The 1929 central bank was on the same inflation snipe hunt, convinced that the roaring twenties brought about by new tech (radio) would cause huge inflation spikes. It hiked and hiked and finally hiked a full 100BP. The market collapsed, the US and world economies followed. Hmm. I guess it beat inflation because it never showed up; just a Great Depression.

The tragedy we are paying for now is the loss of millions of tech jobs the 3 years after Greenspan blew up the tech boom. No investment was made in the US - trillions were lost in the collapse, millions thrown out of work, no investment in tech was believed safe. Instead it all moved overseas. Those jobs were lost and are never coming back. We gave away our tech advantage because people who thought they were smarter than markets blew up those markets over worries of inflation that was not present.

Now we are fighting a trade war to win back our technological advantage and not have it stolen from us again. It is not fun, it is not easy, but if the US is to maintain economic power and the dollar as the reserve currency, it must be done. Decades of weak Presidents and head in the sand congresses have put us here. I have said it often: digging out of a hole is a lot harder than staying out of it in the first place.



CHARTS

Everything gapped lower, SP500 and DJ30 just a bit (relatively), while NASDAQ, SOX and company gapped down to next potential support. Potential because in selling events all support levels are potential until proven. At least NASDAQ and SOX are again at a potential support point.

SOX was hammered again, gapping through the support where it closed Friday and now near the 200 day SMA. On the weekly chart it is not a total disaster as it is holding over the 200 day and is in the upper reaches of the prior range, but it is making things more difficult. That said, what doesn't kill you . . . Okay, reload and reset as SOX has yet another support range to try and hold.

NASDAQ was hit with a strong gap lower as well, closing near 7700 with a doji and just over last week's lows. 7650 represents, more or less, the neckline of a potential head and shoulders pattern from early March.

SP400 gapped to last week's low - Monday - showing a doji and also just over the potential neckline to a head and shoulders pattern.

RUTX shows the same action, gapping to last week's low, holding there on the close.

SP500 gapped to a doji as well, but it was nowhere near last week's low. That doesn't get it off the hook for the downside, it just was not lit up as were the tech stocks.

DJ30 sold but quite modestly, holding over the 200 day SMA and the potential neckline in its own 3 month potential head and shoulders.


LEADERSHIP

Tech was the clear loser - again - while more staid and stoic areas such as aerospace/defense, food, restaurants, some retail, personal products either gained or held their own.

Software struggled again, chips were slammed. The silver lining? Perhaps they are so beaten down they are ready to bounce. Yes, it is pretty soon, but after another blowdown through near support enough sellers could be flushed out.

Software: NOW gapped to the 20 day EMA, WDAY fell to near the 20 day EMA, ADBE gapped to near the 50 day MA. VMW cracked the 20 day EMA. COUP, WDAY, TWLO holding nicely at the 10 day EMA. MSFT not bad with a doji test of the 20 day MA. Feeling some pressure for sure, but most still holding up.

FAANG: FB gapped lower, holding over the 50 day MA where it tested last week and bounced. Okay, double bottom perhaps? Or is that just hope? AAPL gapped to a lower selloff low; did manage to come back from near 180 on the low. AMZN gapped and doji-tapped the 50 day MA on the low before rebounding decently. NFLX gapped down from the 50 day MA test, still just over the bottom of its range. GOOG gapped and sat on the 200 day SMA with a 2% loss.

Aerospace: LMT solid, LLL holding the move higher.

Food: PEP in a modest test. KO in a decent 10 day EMA test. DRI broke higher from a 7 week base with some strong volume. WING was dubbed overbought by one of the afterhours 'gurus.'

Personal products: Some pausing from PG, CL.

Retail: ULTA is trying to bounce from the 50 day MA, showing good volume. COST still solid, adding more upside. BBY hanging on at the 200 day - for now. ROST not bad. TSCO in in a really nice flag test of the 50 day MA. Some retail is working well.

Big tech: CSCO still holding up well, but ORCL is trying to break support while HPE looks ready to roll over in a bear flag.

Financials: V and MA still look great. Banks still look problematic at best, e.g. C, BAC.

Social: MTCH doji testing over the 10 day EMA. TWTR showing a doji at the upper gap point. SNAP holding the 50 day MA after a nice rebound last week. FB gapped to a doji over the 50 day MA - may be getting ready.

Semiconductors: LRCX gapped through the 50 day and sold hard. XLNX gapped lower, tapped the 200 day SMA on the low, showing a doji - perhaps ready to bounce. MU gapped down 4% to a doji. AMAT gapped lower and sold hard; earnings were good last week but could not hold it up. CY gapped and sold to near the 200 day SMA. QRVO, SWKS, AVGO all gapped lower. A circus of ugly that may be so ugly it yields a bounce.


MARKET STATS

DJ30
Stats: -84.10 points (-0.33%) to close at 25679.90

Nasdaq
Stats: -113.90 points (-1.46%) to close at 7702.38
Volume: 2.21B (-1.78%)

Up Volume: 609.93M (-124.08M)
Down Volume: 1.56B (+60M)

A/D and Hi/Lo: Decliners led 1.81 to 1
Previous Session: Decliners led 2.52 to 1

New Highs: 45 (-29)
New Lows: 152 (+48)

S&P
Stats: -19.30 points (-0.67%) to close at 2840.23
NYSE Volume: 754.908M (-10.70%)

Up Volume: 277.153M (+68.466M)
Down Volume: 455.618M (-173.187M)

A/D and Hi/Lo: Decliners led 1.97 to 1
Previous Session: Decliners led 2.88 to 1

New Highs: 72 (-40)
New Lows: 116 (+36)


SENTIMENT

VIX: 16.31; +0.35
VXN: 21.64; +2.25
VXO: 17.70; +0.67

Put/Call Ratio (CBOE): 0.85; -0.24. Even with the selling, put activity fell below 1.0 after 8 of 9 sessions over 1.0. After so many fear days this may show the downside is exhausted near term, meaning a rebound/relief bounce.


Bulls and Bears:

No surprise the bulls faded after trading over the 55 level. Bears faded, however, as the two sides continue to move opposite one another. Bears are falling again and that is not a good indication for the upside.

At this juncture there are still no extremes. Bulls are close to 60, but not there. Bears have overall been more complacent of late.

It did its work in the late 2018 selling with a crossover of the bulls and bears, and when that occurs you expect a recovery. That has been the case. Now with the indices bumping resistance you look for extremes, but bulls are not hitting that 60ish level that has prompted selling/corrections in this long rally from 2009.

Indicator level: Shading to yellow for this week even as bulls backed off. Not in the 60's, but not much fear from the selling.

Bulls: 51.4 versus 55.5

Bears: 17.5 versus 17.8

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.






OTHER MARKETS

INTEREST RATES

Threat level: Back to yellow. 5 year, and 2 year are below the 3 month treasury. Getting over the second 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.

The 3 month yield versus the 10 year: Spread rises 2BP to 3BP.

The 2 year versus the 10 year: Spread falls 1BP to 19BP


10 year: 2.416% versus 2.393

3 month: 2.382% versus 2.393%
2 year: 2.221 versus 2.198%

Historical: the last sub-2% rate was in November 2016 (1.867%). Last trade over 3% was November 2018. 2.6% for quite some time, then yields started higher, first run from November to January, then mid-March.


The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.

EUR/USD: 1.1170 versus 1.11573. Euro actually bounced after a bit higher low in the trend lower below the 50 day MA.

Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.


USD/JPY: 110.085 versus 110.068. Bounced to the 20 day EMA, showing a doji.

Historical: Last below 109 in June 2018 then tumbled to 107 in early January 2019. 114.51 is the recent high from October 2018.


Oil: 63.21, +0.29. Held last week's break higher off the 200 day SMA test. Doji test, likely a continuation doji, meaning after this pause oil continues to rise. That, however, belies how horrible things are supposed to get due to the weak world economies.


Gold: 1277.30, +1.60. Two hard sessions lower and a doji at some support. Trying to base out after that February high.


TUESDAY

Another tech beating to the downside, but afterhours there is an upside bias in the futures with tech names trying to recoup lost ground. GOOG, CSCO, AMZN. Could just be a cruel hoax even if it holds to morning: a gap higher that is then sold, driving the indices to fully test that next support.

On the other hand, as noted earlier, they gapped to doji and may already be in position to try another rebound. Doubt it will last bigger picture, but for the near term many of the stocks that led the selling are way oversold or getting there, namely chips: XLNX, INTC, SMTC, MU are just a few.

Stepping into the upside after such selling takes resolve - and lowered expectations for how far the move will go. Stocks such as HUBS, TWLO, MTCH on these short pullbacks testing good moves are very alluring. No one is selling them, and thus they tend to bounce when the overall market selling pressure subsides. DRI looks super as it breaks higher, IR is one of the more staid stocks in great shape, MCK as well. There are bounce opportunities. But, the market has undergone distribution, has sold hard, and has not shown it can make and sustain a new move. Thus, any upside is just a bounce play. That can work.

Have a great evening!

End part 1
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Market Alert - To the Close

Well, DJ30 has recovered much of the losses, but the growth areas and even SP500 are still struggling with those gaps lower. The dilemma facing us is the gap lower is holding for areas such as chips, but they gapped significantly, making them not great entries.

Another issue is SOX gapped lower but is just over the 200 day MA. Thus, stocks such as LRCX are down hard, but these stocks may be close to finding some bounce support. GOOG is another example: gapped to the 200 day MA, undercut it briefly, rebounded to show a doji at that support. Not the best entry points from a probabilities standpoint.

That said, some of the stronger areas of late are struggling, and that would be software as it is tech/growth. NOW is struggling, WDAY is down harder. COUP is fine and MSFT not bad, but the point is the group is showing some strain.

Even NASDAQ gapped to a doji over last week's low. The oversold areas may be looking at making a stand. We will see on Tuesday, and with the size of the gaps lower, we are not too wild about trying to pull off a long shot.

Given the sharp moves to support that do not provide great entries, it could be there is at least an early move upside Tuesday. If nothing else we can use that as a better entry for downside positions as it takes back some of the gap losses today.

SP500 -18.69, -0.63%
NASDAQ -107.80, -1.38%
DJ30 -74.79, -0.29%
SP400 -0.69%
RUTX -0.66%
SOX -3.91%

______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com

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Market Alert - PreMarket

Futures vs FV: SP -22.60; DJ -161.00; NASD -123.93

Futures started slightly lower but that has tailed off significantly as the premarket session unfolded.

Trade: After the Administration blacklisted Huawei and related companies, GOOG pulled Huawei's android license. INTC cut ties as well. I would expect some kind of retaliation against AAPL.

GS says tariffs on all Chinese goods would cut corporate profits 6%.

China says it is in 'no rush' to restart trade talks with US.


M&A: S/TMOS merger set to receive approval.


Fed: Atlanta Fed governor says he is not anticipating a rate cut in 2019 despite what the market says.


Upgrades: TGT; UAL; GD; ZOOM;

Downgrades: DB (sell); AAL; TSLA; AAPL (price target lowered)


Jobs: F cutting 7,000 positions (10%), mostly in Europe


OTHER MARKETS
Bonds: 2.389% VS 2.394%

EUR/USD: 1.1164, +0.0007

USD/JPY: 109.87, -0.20

Oil: 62.69, -0.07

Gold: 1275.90, +0.20


Futures trying to stabilize the past half hour, working laterally, starting to rise some off the lows. Still a weak open.

Many focusing on the semiconductors -- understandably as they led the market higher, are a key component, and closed last week at the top of the prior range, giving up the breakout to a new high. This is a key level to make a stand. Not holding my breath on that one just yet.

Gap lower makes it harder to enter downside, but if there is a bit of a bounce, that could open some opportunities.








______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com

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Sunday, May 19, 2019

Get Comfortable With the Downside (Weekend Newsletter)

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Weekend Newsletter for
May 19, 2019


Table Of Contents

1) MARKET SUMMARY from THE DAILY

2) STOCK SPLIT REPORT

3) IH ALERTS

4) SUCCESS TRADING GROUP

5) COVERED CALL SERVICE

      

Jon Johnson
1) MARKET SUMMARY
         > >From "The Daily" by Jon Johnson at InvestmentHouse.com


Friday the stock indices tried to make it four straight sessions upside.

- Indices try a fourth session upside, get there, but cannot hold it.
- Overall index patterns just do not look upside positive.
- Leadership remains but it is narrower and of course the chips are down.
- SOX is at the top of its pre-breakout gains where it has to make a stand.
- If need be, get comfortable with the downside.


Market Summary (continued)
Friday the stock indices tried to make it four straight sessions upside, starting weaker but then powering higher into midmorning. This action occurred more than once on the week, and low to high action is typically good action.

Of course, it IS necessary to hold the moves. Thursday the indices rallied nicely, but they also gave up a good amount of the gains into the closing bell. Friday they took it a step - or two or three - farther. Decent enough low to high gains as the Administration postponed auto tariffs for six months, but they could not hold up in the withering fire of late session when trade news hit again, this time not so friendly. Reports from CNBC and others indicated that no talks were ongoing between the US and China, at least regarding trade. Not all that surprising given China's 'outrage' at the US blacklisting Huawei and several related entities as security risks. There are so many episodes of companies finding security backdoors in products sold by Huawei that it is no secret. China just doesn't like the fact that a major China company was caught stealing. It is very hard to do business with that mindset.

It might be hard on China as well. Looking at the Shanghai chart pattern and there is a very definite head and shoulders that Friday looked as if it was rolling over from the right shoulder. Better get the PBOC and everyone else working on more stimulus right now.

That said, the US stock indices were not exactly looking rosy Friday. Of course, the US stock indices are trading just off all-time highs versus almost 50% off the 2018 highs. Nonetheless, there are some serious pattern issues for US stocks after the indices stalled at the prior highs three weeks ago.

Read "The Daily" Entire Weekend Summary
Watch Market Overview Video
Watch Technical Summary Video
Watch Next Session Video


Here's a trade from "The Daily" and insights into our trading strategy:


Chart by StockCharts.com
Please turn on your ability to receive graphics. We are providing you with a detailed chart of this stock. If you are unable to turn on graphics, please CLICK HERE or on the *Read Our Weekend Report Online* link above.

It was an up week with downside bookends Monday and Friday. That led to some upside gains and some downside gains, and it looks as if there will be more downside gains ahead.

ZS (Zscaler, Inc.)
Company Profile
Entered ZS on 4/25 as it moved up from a 50 day EMA test. Picked up the stock for $67.24 and some July $65.00 strike call options for $6.40. It was somewhat bumpy, but ZS managed to trend higher and thus we were able to let it work without too much anxiety in a market already filled with anxiety. It did make an intraday test of the 50 day EMA in early May, but that same day it reversed upside so letting a good play have a bit of leeway worked out. It really took off this past week, hitting the target on Thursday. We banked half the stock for $78.65, gaining almost 17%. We banked half the options for $16.50, a 155+% gain.

TGT (Target Corporation)
Company Profile
Moved in on the downside 5/1 as TGT made a big break lower from the 200 day MA. It gapped below it three sessions earlier, and we were ready when it turned down again, continuing the gap through support. We picked up some June $77.50 strike put options for $4.25. TGT then proceeded to work lower below the 10 day EMA for 8 sessions. Monday TGT gapped lower and sold hard. Tuesday it gapped again, sold, but started to hold at some support. That was our cue to take the gain. We sold the options for $7.60, banking over 75%.

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2) STOCK SPLIT REPORT

Here's a leader play and our current analysis.

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PTCT (PTC Therapeutics--$38.93; -1.03; optionable): Biotech
Company Profile
EARNINGS: 08/01/2019
STATUS: Cup w/handle. PTCT continues working on its pattern, breaking higher then testing last week. Same cup with handle from September 2018 we discussed before when we were looking to play PTCT, but now it is trading post-earnings. Earnings saw it gap and drop, but then immediately rebounded to just over the top of the handle. Faded to test in last week's weakness, holding over the 20 day EMA, testing on lighter volume. We want to play a new break higher for a run at the September highs. That move gains 17% on the stock, 85% on the options.
CHART VIDEO
Volume: 670.877K Avg Volume: 784.565K
BUY POINT: $40.88 Volume=775K Target=$47.94 Stop=$38.55
POSITION: PTCT SEP 20 2019 40.00C - (50 delta) &/or Stock

Learn more about our Stock Split Report and how we have made gains of 321% with our powerful stock split plays!

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3) IH ALERTS

BBY (Best Buy--$68.93; +0.19; optionable)
Company Profile
EARNINGS: 05/23/2019
STATUS: A short double top in April and early May, then a precipitous drop through Monday of last week. On that Monday drop BBY fell through the 200 day SMA and matched the early March low hit as BBY tested the upside earnings gap. Bounced up off that test through Friday, but looks to be stalling at the 200 day SMA. Earnings are Thursday before the open, and while BBY could break upside again on its results, it is a prime setup to gap back down from here. We like it enough to make that play and are looking to enter as BBY breaks lower off this bear flag. A move to the target gains 55%ish on the put options.
CHART VIDEO
Volume: 2.439M Avg Volume: 2.602M
BUY POINT: $67.92 Volume=3M Target=$61.42 Stop=$70.03
POSITION: BBY JUL 19 2019 67.50P - (-40 delta)

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Chart by StockCharts.com
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4) SUCCESS TRADING GROUP
--by the MarketFN STG Team

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Company Profile
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The Daily, Part 1 of 3, 5-18-19

* * * *
5/18/2019 Investment House Daily
* * * *

Investment House Daily Subscribers:

MARKET ALERTS:

Targets hit: None issued
Entry alerts: AAPL; CMI
Trailing stops: AAPL; LRCX
Stop alerts: MCHP; NTES; TSLA

The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
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The Market Video is DIVIDED into component parts: Market Overview, Economy, Technical Summary, and the Next Session. Choose the segments you are interested in without having to search a longer video. Click on the link to the portion you wish to view.

TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
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TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
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TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
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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.


MARKET SUMMARY

- Indices try a fourth session upside, get there, but cannot hold it.
- Overall index patterns just do not look upside positive.
- Leadership remains but it is narrower and of course the chips are down.
- SOX is at the top of its pre-breakout gains where it has to make a stand.
- If need be, get comfortable with the downside.

Friday the stock indices tried to make it four straight sessions upside, starting weaker but then powering higher into midmorning. This action occurred more than once on the week, and low to high action is typically good action.

Of course, it IS necessary to hold the moves. Thursday the indices rallied nicely, but they also gave up a good amount of the gains into the closing bell. Friday they took it a step - or two or three - farther. Decent enough low to high gains as the Administration postponed auto tariffs for six months, but they could not hold up in the withering fire of late session when trade news hit again, this time not so friendly. Reports from CNBC and others indicated that no talks were ongoing between the US and China, at least regarding trade. Not all that surprising given China's 'outrage' at the US blacklisting Huawei and several related entities as security risks. There are so many episodes of companies finding security backdoors in products sold by Huawei that it is no secret. China just doesn't like the fact that a major China company was caught stealing. It is very hard to do business with that mindset.

It might be hard on China as well. Looking at the Shanghai chart pattern and there is a very definite head and shoulders that Friday looked as if it was rolling over from the right shoulder. Better get the PBOC and everyone else working on more stimulus right now.

That said, the US stock indices were not exactly looking rosy Friday. Of course, the US stock indices are trading just off all-time highs versus almost 50% off the 2018 highs. Nonetheless, there are some serious pattern issues for US stocks after the indices stalled at the prior highs three weeks ago.

SP500 -16.79, -0.58%
NASDAQ -81.77, -1.04%
DJ30 -98.68, -0.38%
SP400 -1.15%
RUTX -1.38%
SOX -1.96%
NASDAQ 100 -1.01%

VOLUME: NYSE +14%, NASDAQ +4%. NYSE volume moved up to average as NYSE stocks rallied off lower opens but then rolled back down. Similar action for NASDAQ. That is more distribution action, i.e. higher volume dumping of stocks - clearing out on the rebound.

ADVANCE/DECLINE: NYSE -2.9:1, NASDAQ -2.5:1. Once again the downside breadth is mostly stronger than the upside.


CHARTS

Looking at the charts, there are some very clear, quite ominous double tops on SP500, NASDAQ, NASDAQ 100 when you look at a weekly chart. DJ30 showing a triple top.

SOX is a bit different: its weekly chart shows it sitting on top of the range from late 2017 to early 2019 before the run to a new high. At least it has a breakout and a test it can rally off.

On the daily charts there is that same head and shoulders look from the past three months for pretty much all the indices: SP500, NASDAQ, NASDAQ 100, DJ30, SP400.

The upshot of this is that the patterns don't look all that great. After the 2018 range/topping event, the breaks to new highs or near new highs failed. Most of the indices are now at the point of having to shake off a near term bearish pattern to have the opportunity to try and break up the bigger bearish pattern.

The market's eyes have to be on the semiconductors. A new high failed and the chips are now testing the tops of the 2018 to early 2019 range. The near term pattern here is a head and shoulders as well. If SOX can shake this off, then the rest of the market has a shot at following - for the past few years, as the chips go, so the market goes.


LEADERSHIP

Even some of the stronger sectors, e.g. software, struggled Friday. They did not roll over, but they sold back some after a series of good moves on the week. Other areas that rebounded faded some as well. Some chips are in full frontal dives while some names are hanging on - but it could be there are too few hanging on to offset those dropping.

FAANG: AMZN and GOOG were solid performers starting midweek, and Friday both faded, reversing early upside. Very good moves in recovery, but the overall patterns are not great for the upside. AAPL tapped the 200 day on the week then gapped lower, failing a rebound attempt. FB failed to hold a move over the 10 da for the third session. NFLX looks as if it is failing at the 50 day MA.

Food: Not bad still. PEP a modest Friday gain on top of good moves. KO off some. WING still looking solid.

Personal products: Strong moves through Thursday, backed off some Friday but still solid.

Software: Strong moves on the week, tested on Friday, however. NOW, COUP, HUBS, WDAY - great movers and leaders - all gave back some Friday, but darn little. TEAM exploded higher the past two weeks and it held up very well Friday as well. MSFT was a bit weak Friday after a good Wednesday/Thursday move. Still a solid group.

Big tech: Stocks such as CSCO continued to perform - CSCO's earnings reversed a four week slide off its very solid December to early April rally.

Retail: Some are still solid, e.g. COST, ROST. BBY looks rather weak and ready to fill a gap and even AMZN's overall pattern is not confidence building.

Financials: V posted a strong week, off just a bit Friday. MA showed similar action. Banks such as C, BAC do not look good. MS and GS are struggling as well.

Social: TWTR, SNAP still not bad. FB is not bad either after that big break higher Wednesday. MTCH took a day off after a big week upside.

Transports: While DJ20 shows a bear flag in a head and shoulders, rails are not bad, e.g. CSX, KSU, NSC. Truckers are okay though UPS and FDX are selling off.

Oil: Weak as large and small struggle. XOM, SWN.


MARKET STATS

DJ30
Stats: -98.68 points (-0.38%) to close at 25764.00

Nasdaq
Stats: -81.77 points (-1.04%) to close at 7816.28
Volume: 2.25B (+4.17%)

Up Volume: 734.01M (-585.99M)
Down Volume: 1.5B (+696.28M)

A/D and Hi/Lo: Decliners led 2.52 to 1
Previous Session: Advancers led 1.44 to 1

New Highs: 74 (-43)
New Lows: 104 (+30)

S&P
Stats: -16.79 points (-0.58%) to close at 2859.53
NYSE Volume: 845.375M (+13.73%)

Up Volume: 208.687M (-283.671M)
Down Volume: 628.806M (+394.428M)

A/D and Hi/Lo: Decliners led 2.88 to 1
Previous Session: Advancers led 2.25 to 1

New Highs: 112 (-64)
New Lows: 80 (+37)


SENTIMENT

VIX: 15.96; +0.67
VXN: 19.39; +0.99
VXO: 17.03; +0.84

Put/Call Ratio (CBOE): 1.09; +0.07. Eight of nine sessions over 1.0. Lots of negativity by this measure, but the other indicators are not there yet.


Bulls and Bears:

No surprise the bulls faded after trading over the 55 level. Bears faded, however, as the two sides continue to move opposite one another. Bears are falling again and that is not a good indication for the upside.

At this juncture there are still no extremes. Bulls are close to 60, but not there. Bears have overall been more complacent of late.

It did its work in the late 2018 selling with a crossover of the bulls and bears, and when that occurs you expect a recovery. That has been the case. Now with the indices bumping resistance you look for extremes, but bulls are not hitting that 60ish level that has prompted selling/corrections in this long rally from 2009.

Indicator level: Shading to yellow for this week even as bulls backed off. Not in the 60's, but not much fear from the selling.

Bulls: 51.4 versus 55.5

Bears: 17.5 versus 17.8

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.






OTHER MARKETS

INTEREST RATES

Threat level: RED. 10 year, 5 year, and 2 year are below the 3 month treasury. This is the second 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.

The 3 month yield versus the 10 year: Spread is flat from 1BP.

The 2 year versus the 10 year: Spread holds at 20BP


10 year: 2.393 versus 2.394%

3 month: 2.393% versus 2.401
2 year: 2.198% versus 2.194%

Historical: the last sub-2% rate was in November 2016 (1.867%). Last trade over 3% was November 2018. 2.6% for quite some time, then yields started higher, first run from November to January, then mid-March.


The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.

EUR/USD: 1.11573 versus 1.1174. After moving up to the 50 day MA, the euro has slid back down near the April low.

Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.


USD/JPY: 110.068 versus 109.879. Dollar catching a bid Thursday and Friday after three weeks of decline from the 200 day MA.

Historical: Last below 109 in June 2018 then tumbled to 107 in early January 2019. 114.51 is the recent high from October 2018.


Oil: 62.92, +0.05. After a 2.5 week test at the 200 day SMA, bounced late week, but still off the recent highs just over 66.


Gold: 1275.70, -10.50. Diving lower Thursday and Friday, the same action as in late March and early April: as soon as gold rallies some, it gets sold hard.


MONDAY

While some solid upside leaders remain in solid shape, e.g. software, food, some retail, personal products, not all of them are bull market type stocks and there are just not a lot of them as well. With semiconductors in a serious fight and the indices patterns in serious longer term topping patterns, there may not be enough leadership to move the market higher once again.

We are still playing some upside that looks quality, watching carefully for cracks in the solid patterns. There are still upside possibilities such as VZ and software to name just a couple, and we will look at them in the event they win out. At the same time, however, there are definite downside setups that correspond to the issues the indices are showing. We have more than a few of those working and will look to add more if the downside setups make the downside break.

I know some people do not like the downside, but those who embrace it when it is here find that the gains come rapidly - they also can disappear rapidly as what falls hard tends to bounce hard in relief moves before rolling over once more. If you give it a shot, you will find that gains can come as easily and even more so than in a strong move higher.

Have a great weekend!

End part 1
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Friday, May 17, 2019

Market Alert - Last Hour

Volatile session. Started lower but rallied from the open, something seen more than once this week. Hit a high midmorning, faded some of the move, but then in the last hour selling as trade news hit. The story is there is no talking right now, not surprising given China's comments about the US' treatment of Huawei, i.e. recognizing the company as an IP theft company.

The action leaves the indices sporting modest to significant losses, with the small and midcaps leading the way.

SP500 -15.12, -0.53%
NASDAQ -73.34, -0.94%
DJ30 -89.46, -0.34%
SP400 -0.99%
RUTX -1.16%
SOX -2.02%
NASD 100 -0.97%

SP500, NASDAQ, NASDAQ 100 showing tombston doji just below the 50 day SMA. that suggests the Tuesday to midmorning Friday bounce is a threat to roll back over.

SOX did not wait, gapping lower and failing a recovery attempt. It is now at a lower low for this selling. As the chips go . . .

DJ30 tapped at the 50 day and faded as well.

SP400 gapped lower to the 200 day MA, rebounded back to the Thursday close, but then rolled over. It looks as if it will close below the 200 day.

RUTX very similar.

Good Michigan Sentiment, but trade is still weighing on the market, and the patterns suggest more downside early next week.

Thus, we are looking at opening some downside positions on AAPL and CMI before the close.
______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com

Alert Key
http://www.investmenthouse.com/alertkey.htm

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Thursday, May 16, 2019

The Daily, Part 1 of 2, 5-16-19

* * * *
5/16/2019 Investment House Daily
* * * *

Investment House Daily Subscribers:

MARKET ALERTS:

Targets hit: ZS
Entry alerts: ADBE; ARRY; AVGO; MSFT; SWKS; VRSN
Trailing stops: GOOG
Stop alerts: AVGO; GOOG

The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
https://www.investmenthouse.com/alertdaily.html

********************************************************************
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.


MARKET SUMMARY

- Rebound now 3 days with some areas gaining strength, others growing weaker.
- NASDAQ, SP500 back over the 50 day MA, the other indices unimpressive.
- Software stronger, personal products stronger, AMZN and V stronger . . . but chips need to toughen up.
- AMAT afterhours earnings trying to help stretch the 3-day bounce farther.
- We played the upside, we played the downside -- is the market going to bifurcate? The chips may tell that tale.

A third day upside off the Monday gap lower took NASDAQ, NASDAQ 100 and SP500 back over the 50 day MA, filling the Monday gap lower. While breadth was somewhat improved on NYSE (2.3:1), NASDAQ remained tepid (1.5:1). Okay, not a groundswell of buying, but volume rallied on both exchanges, +4% NYSE, +11% NASDAQ. Big names on NASDAQ 100 were again purchased.

SP500 25.36, 0.89%
NASDAQ 75.90, 0.97%
DJ30 214.66, 0.84%
SP400 0.60%
RUTX 0.58%
SOX -1.68%
NASDAQ 100 1.02%

VOLUME: NYSE +4%, NASDAQ +11%. Finally, some rising volume on an upside session. That put volume back above average for NASDAQ, still disappointingly below average for NYSE.

ADVANCE/DECLINE: NYSE 2.3:1, NASDAQ 1.5:1.


CHARTS

To view, click on the following links:

http://investmenthouse1.com/ihmedia/f/charts/sp500.jpg
http://investmenthouse1.com/ihmedia/f/charts/NASDAQ.jpg
http://investmenthouse1.com/ihmedia/f/charts/DJ30.jpg
http://investmenthouse1.com/ihmedia/f/charts/RUTX.jpg
http://investmenthouse1.com/ihmedia/f/charts/SP400.jpg
http://investmenthouse1.com/ihmedia/f/charts/SOX.jpg
http://investmenthouse1.com/ihmedia/f/charts/nasdaq100.jpg

Perhaps 3 upside days turns the tide back upside. NASDAQ and SP500 over the 50 day MA on better volume indicates more buying than the prior two sessions.

At the same time, however, DJ30 only made it to the 10 day EMA, still below the 50 day. SP400 tapped at the 50 day MA's on the high and faded some gains. RUTX climbed to the 50 day MA as well, moving through them only to give up that level on the close. Sure looks like a 1-2-3 bear flag for the small caps.

SOX was down as AAPL-related chip stocks were hammered on worries of a China trade attack on AAPL. Those chips -- SWKS, XLNX, QRVO -- looked gruesome.

Thus, there was the decent and the not very good. SP500 and NASDAQ provide upside promise, but the other indices are struggling at resistance, and SOX, the key market group in terms of market leadership, is unable to reengage.

Importantly, even outside the AAPL chip stocks, key names do not look great. AVGO gave up the 50 day EMA with a doji on rising, above average volume. Indeed, we exited the upside and moved into a downside position. Now, there may be some hope afterhours. AMAT produced some good results and jumped 2.5 points. It pulled other stocks with it at first, e.g. AMD, MU, but they have since faded. NVDA beat earnings expectations and initially fired higher, but in later trade it has given up just about all the afterhours surge.

As it stands, the move picked up strength it did not have the first two upside sessions Tuesday and Wednesday, but it was hardly blowout. The best index patterns are still problematic (SP500, NASDAQ) while the others are still bearish.

Leadership is definitely hot and cold.

Hot: Software, food, personal products, big tech, parts of FAANG (read AMZN, GOOG somewhat), V, PYPL, social.

Cold to Not: Some key chips, machinery, banks/brokerages, energy, AAPL, and more.


FRIDAY

We bought some upside (ADBE, MSFT, VRSN), some downside (ARRY, AVGO, SWKS) as the patterns indicated. Software remains very solid and thus we were buying that upside. Chips are weaker, so they were logical downside plays along with the biotech ARRY that failed at the 50 day MA on volume.

After 3 days upside Friday could see a pause to end the week. Could; the past two sessions we said to watch for weakness to set back in but stocks found bids. That said, often rebound moves come in 3-day groups just as pullbacks often show that 1-2-3 action. Bad news also comes in three's they say. Just threw that in there.

Volume was up, breadth better, and strong leadership groups showed a lot of leadership power (software). Chips, a very important leadership group, had serious weakness in some key names. Without chips moving upside, gains are definitely harder to score. FAANG stocks received stronger bids this week, but are still somewhat problematic after the bounce. NFLX at the 50 day MA, GOOG there as well, fading off its intraday high. AMZN looks solid but AAPL shows that bear flag below the 200 day MA.

Obviously we do not have the utmost confidence in this move back up given the prior distribution, the breaks of support, the less than enthusiastic move back up. Nonetheless, you go with the market and what it shows.

The market showed definite weakness in some areas -- even on an upside session -- and we are playing into the weakness. The market also showed definite strength in some areas and we bought into that strength with more software. That is on top of the personal products and food positions taken earlier in the week.

If the market wants to bifurcate, that works as we can make money on those disparate moves. The issue keeps coming back to the chips and how they stepped back from leadership -- the chips are market direction indicators and they are heading both ways both before and after the close. AMAT is up nicely. NVDA jumped then fell back to flat. Others are trying to follow AMAT. We will see if they can pull it together after these earnings. The market upside needs the chips to get it back together.

Have a great evening!


MARKET STATS

DJ30
Stats: +214.66 points (+0.84%) to close at 25862.68

Nasdaq
Stats: +75.90 points (+0.97%) to close at 7898.05
Volume: 2.16B (+10.99%)

Up Volume: 1.32B (+30M)
Down Volume: 803.72M (+119.31M)

A/D and Hi/Lo: Advancers led 1.44 to 1
Previous Session: Advancers led 1.48 to 1

New Highs: 117 (+34)
New Lows: 74 (+7)

S&P
Stats: +25.36 points (+0.89%) to close at 2876.32
NYSE Volume: 743.348M (+4.40%)

Up Volume: 492.357M (+91.866M)
Down Volume: 234.378M (-55.202M)

A/D and Hi/Lo: Advancers led 2.25 to 1
Previous Session: Advancers led 1.98 to 1

New Highs: 176 (+71)
New Lows: 43 (-19)


SENTIMENT

VIX: 15.29; -1.15
VXN: 18.40; -1.52
VXO: 16.19; -1.46

Put/Call Ratio (CBOE): 1.02; -0.13. Seven of eight sessions over 1.0 is providing upside fuel.


Bulls and Bears:

Bears stopped the decline but did not bounce, holding 17.8 for a second week. Bears finally broke their semi-negativity and dropped the past few weeks. As noted, that was a negative indication for the rally as they had remained more bearish in a relative sense than bulls. The decline suggested a selloff and that occurred, more or less.

Bulls backed off a point after rising steadily. Just as they got within 5 points of that 60% range where the upside moves have stalled, bulls lost their nerve a bit.

At this juncture there are still no extremes. Bulls are close to 60, but not there. Bears have overall been more complacent of late.

It did its work in the late 2018 selling with a crossover of the bulls and bears, and when that occurs you expect a recovery. That has been the case. Now with the indices bumping resistance you look for extremes, but bulls are not hitting that 60ish level that has prompted selling/corrections in this long rally from 2009.

Indicator level: Shading to yellow for this week even as bulls backed off. Not in the 60's, but not much fear from the selling.

Bulls: 55.5 versus 56.4

Bears: 17.8 versus 17.8

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.






OTHER MARKETS

INTEREST RATES

Threat level: RED. 10 year, 5 year, and 2 year are below the 3 month treasury. This is the second 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.

The 3 month yield versus the 10 year: Spread inversion decreases to 1BP.

The 2 year versus the 10 year: Spread falls 1BP to 20BP


10 year: 2.394% versus 2.371%

3 month: 2.401 versus 2.409
2 year: 2.194% versus 2.164%

Historical: the last sub-2% rate was in November 2016 (1.867%). Last trade over 3% was November 2018. 2.6% for quite some time, then yields started higher, first run from November to January, then mid-March.


The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.

EUR/USD: 1.1174 versus 1.12057. Sharp break lower for the euro after failing at the 50 day MA with the Monday doji.

Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.


USD/JPY: 109.879 versus 109.547. After a 3 week drop to the March lows, the dollar posted a pretty solid bounce.

Historical: Last below 109 in June 2018 then tumbled to 107 in early January 2019. 114.51 is the recent high from October 2018.


Oil: 62.87, +0.85. Trying to make a bounce off the 200 day SMA.


Gold: 1286.20, -11.60. Dropped hard back through the 50 day MA it just took out Monday. Strength in stocks making gold less lustrous.

End part 1 of 2
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Market Alert - Pre-Market

Futures vs FV: SP 11.64; DJ +127.98; NASDA +24.25

Futures started the session flat then rallied at 5:30ET and have held the gains since.

Trade: Still the front burner issue. Administration basically black lists Huawei and its affiliates as threats to the US national security. About time. Huawei's warnings the US will fall behind in 5G and that the US actions could be 'violations of law' are laughable. Violations of law as opposed to Huawei hardwiring spy infrastructure in products supplied to US companies? An alcoholic has to admit it is an alcoholic before recovery is possible. It is easy to see relations with China (and Chinese companies ARE China) have a long way to go. Trade deal? That is a good one!

Chinese yuan: down for a twelfth straight session, a record in recent times. China is at it again, i.e. being an upstanding member of the WTO, not manipulating its currency as it promised . . .

World trade: Maersk sees a "significant slowdown" in Mediterranean shipping.


Housing Starts, April: +5.7% vs 5.4% expected

Permits: 0.6% vs 1.7% expected


Philly Fed, May: 16.6 vs 10.0 expected vs 8.5 April


Upgrades: M; KBH; PFE

Downside: GLOW

Earnings beats: CSCO; DDS (BL)

Misses: WMT (TL -- but online revenues continued to grow)


M&A: KSS approaching AtHome Group


OTHER MARKETS
Bonds: 2.394% vs 2.371%. 3 mo/10 year still inverted and 3 mo is over 2 year that is over the 5 year yield.

EUR/USD: 1.1202, +0.03

USD/JPY: 109.67, +0.11

Oil: 62.85, +0.83

Gold: 1293.40, -3.50


Futures have backed off from the post-US economic data bump higher, but still holding solid gains. As of the open, the 2-day bounce is not dead. The stock indices will further test the support broken on Monday and we will see if the support turns resistance or if the indices can beat the odds and the distribution sessions and continue higher. If they do, hopefully they will show better internals, e.g. volume, breadth. That said, we are not expecting it to hold, but our expectations of course are subjugated to what the market does.

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Jon Johnson, Chief Market Strategist
InvestmentHouse.com

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Wednesday, May 15, 2019

The Daily, Part 1, 5-15-19

* * * *
5/15/2019 Investment House Daily
* * * *

Investment House Daily Subscribers:

MARKET ALERTS:

Targets hit: None issued
Entry alerts: PEP; PG; V
Trailing stops: None issued
Stop alerts: None issued

The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
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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.


MARKET SUMMARY

- Chinese, US data push futures lower, but a delay in auto tariffs rebounds indices to positive.
- Large cap NASDAQ leads the market back upside with some impressive moves from GOOG et al.
- Key indices are back to the 50 day MA and the March highs on light volume. Not convincing upside.
- Bonds remain inverted, others finally noticing. Will the Fed?
- 2-day bounce looks very much like a relief move that could be over as fast as Thursday.

Wednesday was setting up to be a downside continuation after the Tuesday bounce on the heels of the Monday downside slaughter. Made sense: the indices broke key support levels, posted a modest, low volume relief day, then would roll over and finish the move to next support, e.g. the 200 day SMA for SP500 and NASDAQ.

Futures were down but not sharply lower. Chinese data for retail sales, industrial production and fixed asset investment all missed expectations. Apparently the tariffs in existence already are taking their toll -- but we knew that to be the case. No worries, however, for Chinese markets as they traded a bit higher on the idea that misses in economic data mean more stimulus. Giddy up as some of the afterhours trading show clowns would say. Xi even got some words in, opining it is 'foolish' for other countries to try to impose upon others how they should act, etc. Sure, do your own thing Mr. Xi, but don't expect the rest of the world to play along with you.

Futures doubled losses, however, when Retail Sales data was released, and then weakened further when the capacity and production numbers hit.

Retail Sales, April: -0.2% vs +0.2% expected vs 1.7% prior (from 1.6%).
Year/year: +3.3%

Ex-Autos: 0.1% vs 0.6% expected vs 1.3% prior (from 1.2%)
Year/year: +3.1%

Control Group: 0.0 vs 1.0 prior

Lower: autos -1.1%, internet sales -0.15%, appliances and apparel down as well.


Empire Manufacturing PMI, May: 17.1 vs 7.7 exp vs 10.1 April.
Not bad at all. Nice to see.


Industrial Production, April: -0.5% vs 0.1% exp vs 0.2 prior (from -0.1%)

Capacity Utilization: 77.9 vs 78.8 exp vs 78.5% March (from 78.8%)


Bonds: All this weaker economic data pushed bond yields lower keeping the 3 month/10 year treasuries inverted. Investor's Business Daily finally picked up on this tonight. The Fed controls the short term rates and they are higher than longer term as they are propped up by the Fed. If the real rate of money is lower, the Fed needs to take heed. The yield curve is starting to scream at the Fed. If it waits until the end of July to move that is likely too late.


Futures put in a double shuffle lower with Dow futures dropping from -70 to -145. Yes, the test of the 200 day SMA looked to be on the way. Market needs it. Get it done, get it over with.

Stocks sold at the open, bounced modestly in relief, then at 10:10ET reports the Administration would delay import tariffs on autos circulated and stocks spurted upside. That set off a rally up to the last hour. Nice gains as a result, led by tech and particularly the biggest tech. Some fading in the last hour, but the gains held.

SP500 16.55, 0.58%
NASDAQ 87.66, 1.13%
DJ30 115.97, 0.45%
SP500 0.27%
RUTX 0.34%
SOX 0.81%
NASDAQ 100 1.37%

VOLUME: NYSE -5%, NASDAQ -7%. Of course, trade declined on an upside session. Volume declines on the upside, rising on the downside is characteristic price/volume action when big investors are unloading shares.

ADVANCE/DECLINE: NYSE 2:1, NASDAQ 1.5:1. No great shakes as the large caps led the way as noted earlier. As with volume, characteristic of a relief bounce versus a new leg higher.


THE MARKET

The price/volume action and the internals are indicative of a relief bounce. The chart patterns in the indices also suggest a relief move bounce in progress the past two sessions. Do not be surprised to see the indices flare out near the 50 day MA's where SP500, NASDAQ, NASDAQ 100, SOX closed Wednesday.


CHARTS

It is apparent the Tuesday modest rally was not the end of the relief move and that the indices wanted to bounce to the 50 day EMA to test that breach without testing to the 200 day MA. Perhaps, perhaps that means the 200 day will actually provide some support? We will see.

NASDAQ 100: Have to lead with this group as it led the market higher in the rebound. GOOG +3.9%, FB 3%, NFLX 2.7% -- the big names finally received new bids, aided by an upgrade in GOOG that unleashed buys from many wanting to buy but waiting to get in. NASDAQ 100 rallied to the 50 day MA, still not closing the Monday gap, but at a very important resistance level that it gapped through Monday.

NASDAQ: Same action, rallying up to the 50 day MA's, testing the break lower. Rallied back to test the break of this key level, basically at the mid-March high and thus a point where NASDAQ could stall and form the apex of a right shoulder to a head and shoulders that spans March to present.

SP500: Bounced for a second session off a lower open, moving decently but certainly not with NASDAQ's panache. Up to the 50 day MA as well along with the mid-March bounce high, that potential peak of a right shoulder to a head and shoulders top spanning March to present. A weak rebound thus far and that suggests the 50 day/gap point/March peak represents a key level: after all, it gapped below those levels on the way down, a strong move. Thus far this move back up is not as strong.

SOX: Very similar to SP500 with a pair of modest moves back up to the 50 day MA after gapping through that support Monday. Looks very much like a modest bounce higher to test the support that was broken.

DJ30: Started the session again at the 200 day SMA and moved higher from there. Unlike the other indices, DJ30 is still well below the 50 day MA's that are coincident with the late February peak. If SP500 and SOX look to be weak rebounds, this one is very weak.

SP400: Started at the same point it started the Tuesday session, managing to rally and close just over the 200 day SMA. Still below the Monday lower gap point. Not much of a move higher by the midcaps, and obviously they were a clearly lagging group Wednesday.

RUTX: Two slow days upside after the harsh Monday dive bomb. As with DJ30, not even back to the 50 day MA's yet. Bouncing but just following along, and that means it likely stalls out relatively quickly.


LEADERSHIP

FAANG: From unimpressive to at least impressive in percentage moves. GOOG was up well over 4% before it slid some last hour. FB posted a nice break higher off the 50 day MA test, and the move was on decent trade. AMZN also moved up off a 50 day MA drop Monday and Tuesday. Decent trade. AAPL up on lower trade, tapping at the 200 day SMA on the high. Just not much strength for AAPL. NFLX up off support over the 200 day SMA, very solid volume. Trying to bounce from the bottom of its 4 month range.

Software: Solid again in most cases. COUP moved to a higher high on rising, average volume. NOW up again but no volume. WDAY posting a nice move on solid enough trade. HUBS started upside after gapping lower but volume was light so we held off. VMW moving well. MSFT started higher on decent volume off this test; promising. NEWR gapped below the 50 day MA.

Semiconductors: NVDA still stinks. LRCX bouncing off the 50 day MA, so-so volume, doing what it needed to do. AVGO rallied to tap the 20 day MA on very light trade; looks as if it will roll over here. XLNX upped its guidance but not many seemed to care, posting a modest bounce. SWKS up a bit, SLAB bounced but volume was light. Same for SMTC. These look as if they are bouncing to set up some downside plays. UCTT, BRKS still quite solid. AMAT jumped up to the 50 day MA on rising, above average volume. Some promising patterns and moves, many are not.

Personal products: CL modestly higher on big volume. PG posted a pretty solid move. WING holding the 20 day EMA with a doji.

Food: PEP broke to a higher high. MCD still working laterally below the recent highs. jumped, faded. WING dropped back to the 10 day EMA. KO breaking higher over the late April peak.

Financials: V posting a nice move upside on solid volume. Banks were up in some cases (JPM, C) but not much. BAC lower. TCBI, regional, showing a nice doji tap of the 50 day SMA. Overall lackluster.

Machinery: Did not move much. CMI up to the 50 day MA, lower trade. CAT flat on very low trade. DE fell farther below the 200 day SMA it broke Monday.



MARKET STATS

DJ30
Stats: +115.97 points (+0.49%) to close at 25648.02

Nasdaq
Stats: +87.66 points (+1.13%) to close at 7822.15
Volume: 1.946B (-6.44%)

Up Volume: 1.29B (-340M)
Down Volume: 684.41M (+253.23M)

A/D and Hi/Lo: Advancers led 1.48 to 1
Previous Session: Advancers led 2.66 to 1

New Highs: 83 (+24)
New Lows: 67 (-18)

S&P
Stats: +16.55 points (+0.58%) to close at 2850.96
NYSE Volume: 711.992M (-5.25%)

Up Volume: 400.491M (-182.344M)
Down Volume: 289.58M (+129.181M)

A/D and Hi/Lo: Advancers led 1.98 to 1
Previous Session: Advancers led 3.14 to 1

New Highs: 105 (+32)
New Lows: 62 (+7)

SENTIMENT

VIX: 16.44; -1.62
VXN: 19.92; -2.31
VXO: 17.65; -1.87

Put/Call Ratio (CBOE): 1.15; +0.13. 6 of 7 closes over 1.0. Definitely bounce material in itself.


Bulls and Bears:

Bears stopped the decline but did not bounce, holding 17.8 for a second week. Bears finally broke their semi-negativity and dropped the past few weeks. As noted, that was a negative indication for the rally as they had remained more bearish in a relative sense than bulls. The decline suggested a selloff and that occurred, more or less.

Bulls backed off a point after rising steadily. Just as they got within 5 points of that 60% range where the upside moves have stalled, bulls lost their nerve a bit.

At this juncture there are still no extremes. Bulls are close to 60, but not there. Bears have overall been more complacent of late.

It did its work in the late 2018 selling with a crossover of the bulls and bears, and when that occurs you expect a recovery. That has been the case. Now with the indices bumping resistance you look for extremes, but bulls are not hitting that 60ish level that has prompted selling/corrections in this long rally from 2009.

Indicator level: Shading to yellow for this week even as bulls backed off. Not in the 60's, but not much fear from the selling.

Bulls: 55.5 versus 56.4

Bears: 17.8 versus 17.8

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.






OTHER MARKETS

INTEREST RATES

Threat level: RED. 10 year, 5 year, and 2 year are below the 3 month treasury. This is the second 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.

The 3 month yield versus the 10 year: Spread inversion increases to 4BP.

The 2 year versus the 10 year: Spread holds at 21BP


10 year: 2.371% versus 2.414%

3 month: 2.409 versus 2.416%
2 year: 2.164% versus 2.199%

Historical: the last sub-2% rate was in November 2016 (1.867%). Last trade over 3% was November 2018. 2.6% for quite some time, then yields started higher, first run from November to January, then mid-March.


The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.

EUR/USD: 1.12057 versus 1.12060

Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.


USD/JPY: 109.547 versus 109.634

Historical: Last below 109 in June 2018 then tumbled to 107 in early January 2019. 114.51 is the recent high from October 2018.


Oil: 62.02, +0.24


Gold: 1297.80, +1.50


THURSDAY

Two relatively weak upside sessions -- despite some really big moves by individual names -- has SP500, NASDAQ and others at the 50 day MA and the March peak. We picked up some personal products-type positions as they are performing, but held off from other areas on the bounce.

If stocks weaken and start to roll over here then we will of course look at downside plays: the initial break lower, the relief move to resistance, and a new rollover likely takes stocks even lower than the recent lows.

That means looking at more downside plays after this bounce to resistance and closing upside positions that stall themselves.

This does not mean the move has to end, the probabilities just suggest it and you prepare for that, particularly given the distribution sessions preceding the drop and the low volume, narrow breadth recovery.

Have a great evening!

End part 1
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Market Alert - Last Hour

Some impressive moves, particularly in tech, has the indices nicely positive. The question on everyone's lips is 'can it hold?' As for the leaders, well, the techs and chips were hardest hit; those hit hard typically bounce hard.

All clear? No. SP500, NASDAQ, NASD 100, SOX have all rebounded to the 50 day MA. A powerful price move, but the potential head and shoulders has not been defeated. Indeed, NASDAQ is at the point where a right shoulder would apex; SP500 as well for that matter. Thus, a nice bounce but not defeating the bearish patterns that are trying to set up. A good move for sure, and this can be the catalyst for more good moves. At this point, not quite there.

Picked up some V, PEP, looking at PG and TNDM. HUBS is interesting but not much volume on the move. As for existing, positions, letting them rebound with the idea we let them go as far as they will on this move. With several indices already back at the 50 day MA, a further move remains problematic, but we are willing to give them a chance.

SP500 20.45, 0.72%
NASDAQ 94.99 1.23%
DJ30 149.99 0.59%
SP400 0.40%
RUTX 0.41%
SOX 1.12%
NASD 100 1.46%
______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com

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Market Alert - Early Action

Trump administration says it will delay the auto import tariffs. That includes Europe and of course some US manufacturers who make autos overseas. Given the drop in auto sales in the retail sales report, one would assume there is some connection.

Stocks are up nicely off the lows hit basically just before the market opened, just now hitting session highs. NASDAQ 100 is leading along with SOX as those beaten up stocks rebound. Once again a prediction of a 200 day MA test is rebuffed. That is okay, though you have to wonder how long that will get put off.

Picked up a position on V. Software stocks are not bad but not surging. PEP looks interesting as it toys with a breakout. ZS is surging again. Drugs and biotech are coming off the lows -- TNDM is trying to make its move and will keep watching to see if it can hold.

Now we see how the indices can hold after this spurt on 'good' trade news.

SP500 6.85, 0.24%
NASDAQ 45.60, 0.59%
DJ30 14.94, 0.05%
SP500 -0.06%
RUTX -0.38%
SOX 0.75%
NASDAQ 100 0.72%
______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com

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Market Alert - Pre-Market

Futures vs FV: SP -15.76; DJ -133.05; NASDAQ -43.13

Futures were off 70 Dow points on weaker Chinese retail, industrial production, and fixed asset investment -- all missing expectations. Futures then really dropped when the US data came in with retail sales misses even if the New York PMI beat handily. It would appear the Tuesday upside was the one-day bounce opined in last night's report. Perhaps the indices will test the 200 day MA today (NASD, SP500).

China: Data weaker than expected. Xi comments about the perils of isolationism, trying to shape other nations being foolish, etc. At the same time it is obvious the US existing tariffs are biting and they will get worse with the new tariffs.


Retail Sales, April: -=0.2 vs +0.2 exp vs 1.7 prior (from 1.6%.
year/year 3.3%

Ex-Auto: +0.1 vs 0.6 exp vs 1.4 prior (from 1.2).
year/year 3.1%
Autos -1.1%
Internet sales off
Appliances, apparel off


Empire Manufacturing, May: 17.1 vs 7.7 exp vs 10.1 prior


Industrial Production, April: -0.5% vs 0.1 exp vs -0.1 March

Capacity Utilization: 77.9% vs 78.8% vs 78.5% (from 78.8)


Upgrades: CVX, GOOG, AMAT, Z, TLRY, JD

Downgrades: TSLA

Beats: BABA, Container Stores

Misses: A (TL, BL); TLRY (BL)

XLNX: Upped its 2019 outlook. Its stock certainly is not reflecting that of late.


Bonds: Still a 3 month/10 year inversion at 2.411% vs 2.361% as the 10 year dives. Still no mention on the financial stations . . .


Stocks are on a tantrum, one brought about by weakening data, bond inversions, and triggered by the trade deal failure.

How long until the next Trump tweet on rates? Perhaps he waits given China perceives his push for lower rates as a sign of economic weakness, and with the weaker data that would fit that narrative.

What is the Fed going to do? Prices are holding lower and now the economic data is mixed again.


OTHER MARKETS
Bonds: 2.366% vs 2.414%. 3 mo at 2.411%

EUR/USD: 1.1181, -0.0022

USD/JPY: 109.29, -0.30

Oil: 61.12, -0.66

Gold 1301.30, +5.00


Futures are at the session low as stocks try again to find a bottom in this selloff, worsening after the Ind production and capacity numbers. As stated earlier, perhaps today SP500 and NASDAQ get to the 200 day MA and try to set some kind of bottom on this part of the selloff.

______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com

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