Tuesday, January 22, 2019

The Daily, Part 1, 1-22-19

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1/22/2019 Investment House Daily
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Targets hit: None issued
Entry alerts: ULTA
Trailing stops: None issued
Stop alerts: LRCX; SIMO

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- Expected some backfilling after the expiration rally/break to a higher high, but some were cave-ins versus just backfilling.
- Renewed trade worries about a meeting that was cancelled that supposedly was never scheduled. If a meeting that was never scheduled is cancelled, does the market hear it?
- Okay, the 'test' of the break higher is here, and already the indices need to hold and bounce to keep the third leg alive.

After breaking higher through next resistance Thursday and on Friday expiration, stocks were vulnerable to a pullback. Tuesday there news was a US/China trade meeting for later in the week was cancelled by the US. This was on top of an already weak tape from the morning on lots of worry about growth.

Specifically, Ray Dalio was quoted on many headlines as stating there was "significant risk" of a recession in 2020. Well, he did say 'recession,' but he quickly changed that to 1% growth or thereabouts -- he calls it a recession but he said he didn't want to get too technical, that it would be slower than today.

Others had the same call. The IMF cut its 2019 global forecast to 3.5%, the US down to 3.0%. Billionaire hedge fund manager Klarman who predicts a global economic slowdown. Okay, but isn't that happening somewhat right now?

Still, as noted over the weekend, the world economy can slow and the US still does fine. That requires the US not to mess up, to not intentionally slow itself down as the Fed chases a fear of something and the elected government chases its tail, trying to catch itself.

China was already in the news as its growth was in the 6%ish range, the slowest in many, many years.

Suffice it to say that investors, after a break higher through resistance last week and on expiration, were a bit pensive. Always so after an upside expiration, and also when trade, one of the purported reasons for last week's upside move, was again suddenly put on the front burner with questions flying about the chances of success.

Didn't help that SWK issued a pretty negative warning about the housing sector with its earnings beat, and that was followed by Existing Home sales falling 6.4% versus the -1.3% expected.

Futures were lower, stocks opened lower, trended lower, then were really sold midday when the report about the US/China meeting was cancelled. Some pretty steep losses indeed took the indices right back to that 50 day MA they did a good job breaking through.

Then with 20 minutes left in the session, Larry Kudlow appeared on CNBC to . . . you got it . . . attempt a stick save of the session. Similar to special prosecutor Mueller in refuting last week's Buzzfeed story, Kudlow refuted the earlier cancellation story, stating there was NO meeting to cancel. The only meeting is the one at the end of the month, the one that we were told was planned after the 'hopeful' prior trade talks adjourned with progress made.

Stocks recovered off the lows -- a bit -- cutting the losses but not by much. Traders and investors were a bit skeptical of the late run to the studio.

SP500 -37.81, -1.42%
NASDAQ -136.87, -1.91%
DJ30 -301.87, -1.22%
SP400 -1.53%
RUTX -1.69%
SOX -2.85%
NASDAQ 100 -2.03%

VOLUME: NYSE -3.6%, NASDAQ -2.5%. Good to see volume decline on selling. Back below average on NYSE, NASDAQ as well.

ADVANCE/DECLINE: NYSE -3.4:1, NASDAQ -3.2:1. Stronger than the upside but not overpowering.

The big names were targets as the big names had put in good moves the prior week(s). AMZN, GOOG, NFLX and others were sold sharply. They managed to hold some support, but it was not a pleasant session for them.

The chips were hard hit. After the gap and rally Friday they were sold down, losing the Friday move and more. SOX managed to hold the 50 day MA, but many solid names struggled, e.g. LRCX.


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The indices were hit, but on the day support held. We anticipated some softness after the upside expiration, and we got it, the downside exacerbated with the trade stories. For now, they held that 50 day MA. No doubt they can shake off a post-expiration rally weak day, worsened by the trade story, but they have to go ahead and do it. If they fail, they fail, and likely head lower to a test.

SOX: After a new recovery high Friday, clearing the prior January high and the short inverted head and shoulders, SOX sold back. Tapped the 50 day SMA on the low, closed at the 50 day EMA. Held where it needed to, but all the stocks that were improved last week are back at the drawing board, needing to hold support and then to see if they can continue.

NASDAQ: NASDAQ action was similar, from a gap to a new recovery high to a gap back down, wiping away Friday and Thursday. That left NASDAQ back at the 50 day MA's, still inside the bottom of the October/December range, but at a point it HAS to hold and continue higher as if Tuesday was just a bogus trade story/post-expiration rally 'thing.' With the upside move still considered a bounce, it has to make the move higher from here.

SP500: Moved over the 50 day MA Thursday, continued higher Friday, then dropped back to the 50 day MA's Tuesday. Okay, closing just over the 50 day MA and the bottom of the October/December range, the point where this index needs to bounce as well.

DJ30: Same action as SP500, fading the solid break higher Thursday and Friday. Broke through the 50 day MA's and the bottom of the Oct/Dec range, now testing it in one move. Not a bad tap at the 50 day EMA then rebound to close. IBM will really help as it is very heavily weighted and is up 8 points (6.5%) afterhours on its earnings and its increased guidance.

SP400, RUTX: Same action as its larger NYSE brethren, solid break higher late week, testing back near the 50 day MA Tuesday.


FAANG: All tested, some harder, mostly those that rallied harder. FB fading on lighter trade, setting up an entry for those not in. AMZN gapped lower and sold off to close at the 50 day EMA; of course, at a point it needs to bounce. NFLX gapped below the 200 day SMA and sold to fill the gap from two weeks back; 320 is some support. GOOG showed AMZN action, gapping lower, selling to test the 50 day EMA on the low; gapped up, gapped down -- must hold and bounce. AAPL sold down from the 20 day EMA in a not very positive move.

Software: Again one of the stronger groups. CRM sold but bounced off the 10 day EMA after a gap lower. COUP held up very well. NOW, DATA tested back but still look quite solid. SPLK a modest fade on light trade. MSFT is actually in a pretty good test of last week's upside move.

Financial: Giving just a smidge back after good breaks higher and rallies. Lower volume as well, e.g. GS, BAC, WFC. JPM looks solid. Overall group looks solid.

Semiconductors: Tough session but not a back breaker. AMD, AMAT, RMBS, UCTT tested back, all still decent. SMTC dropped hard. SIMO fell hard after a solid Friday; LRCX dropped hard as well.

Pot: Not a bad group, relatively. CGC holding laterally after a good move upside. CRON surged to a higher high, faded. TLRY continued to fade, down another 5.7%.

Metals: CENX testing the 50 day EMA; not bad. FCX faded some of the Friday move after a good week. Could test back and set up a good entry.

Machinery: After a good surge this group faded Tuesday, some on decent trade, e.g. CMI. CAT volume was lower as it fell back from the 200 day SMA. TEX fell back below the 50 day EMA.

Drugs: Lackluster. PFE trudging along below the 50 day MA. MRK holding the 50 day MA in a 4 week lateral move. LLY holding the 20 day EMA as it slowly trends higher. Biotechs basically flat.

Energy: Still not bad, the service companies fading but still holding interesting trend reversal possibilities.


Stats: -301.87 points (-1.22%) to close at 24404.48

Stats: -136.87 points (-1.91%) to close at 7020.36
Volume: 2.39B (-2.45%)

Up Volume: 513.5M (-1.236B)
Down Volume: 1.86B (+1.19B)

A/D and Hi/Lo: Decliners led 3.15 to 1
Previous Session: Advancers led 2.26 to 1

New Highs: 26 (-7)
New Lows: 38 (+15)

Stats: -37.81 points (-1.42%) to close at 2632.90
NYSE Volume: 969.344M (-3.61%)

Up Volume: 148.516M (-696.575M)
Down Volume: 817.128M (+659.237M)

A/D and Hi/Lo: Decliners led 3.37 to 1
Previous Session: Advancers led 2.87 to 1

New Highs: 15 (-16)
New Lows: 28 (+16)


VIX: 20.80; +3.00
VXN: 25.02; +3.13
VXO: 21.19; +3.43

Put/Call Ratio (CBOE): 0.93; +0.09

Bulls and Bears:

After a quick crossover, a quick trist, bulls rebounded, bears fell a bit, and there is some separation. Still, the deed is done; they crossed over, typically a very good indication sentiment was extreme to the negative and sets up a move higher. We are seeing a move and now the indices are near the next key levels of resistance.

Bulls: 34.8 versus 29.9

Bears: 29.4 versus 34.6

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: 34.8 versus 29.9
29.9 versus 39.3 versus 45.4 versus 46.7 versus 38.3 versus 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: 29.4 versus 34.6
34.6 versus 21.4 versus 20.4 versus 21.50 versus 20.6 versus 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: 2.75% versus 2.788%. Nice fade off the breakout to just over the 50 day MA/200 day MA, gapping upside Tuesday as the worry put a bid in bonds. Okay, bonds suggest they want to bounce and that would likely mean stocks would struggle further.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.788% versus 2.752% versus 2.727% versus 2.718% versus 2.706% versus 2.699% versus 2.733% versus 2.712% versus 2.731% versus 2.694% versus 2.668% versus 2.552% versus 2.643% versus 2.686% versus 2.716% versus 2.774% versus 2.811% versus 2.736% versus 2.788% versus 2.803%. versus 2.762% versus 2.821% versus 2.855% versus 2.895% versus 2.913% versus 2.908% versus 2.884% versus 2.863% versus 2.854% versus 2.892% versus 2.915% versus 2.979% versus 2.993% versus 3.032% versus 3.061% versus 3.058%

EUR/USD: 1.13652 versus 1.13636. Euro shows a doji at support at 1.135.

Historical: 1.13636 versus 1.13919 versus 1.13993 versus 1.14802 versus 1.14734 versus 1.14699 versus 1.15075 versus 1.15532 versus 1.14547 versus 1.14834 versus 1.13980 versus 1.13957 versus 1.13343 versus 1.14450 versus 1.14425 versus 1.1432 versus 1.13588 versus 1.14015 versus 1.13708 versus 1.13828 versus 1.13755 versus 1.13533 versus 1.13049

USD/JPY: 109.651 versus 109.773. Forming a short 1-2-3 tests after breaking up through the 20 day EMA last Wednesday.

Historical: Last below 109 in June 2018: 109.773 versus 109.133 versus 108.912 versus 108.551 versus 108.340 versus 108.563 versus 108.332 versus 107.959 versus 108.802 versus 108.705 versus 108.517 versus 107.173 versus 107.515 versus 109.687 versus 110.273 versus 110.845 versus 111.190 versus 110.337 versus 111.223 versus 111.21 versus 112.521 versus 112.477 versus 112.653 versus 113.382

Oil: 53.01, -1.03. Faded, but still holding at the 50 day MA and over the 52.50 resistance level.

Gold: 1283.40, +0.80. Showing a doji at the 20 day EMA as gold tries to ghang on with its 3 week flag.


IBM up 6.5% as noted earlier, and that will add some zip in the Dow's gait. Futures are up afterhours though not flying.

The market needs the help: a break higher to end last week is immediately dropped. Okay, after an upside expiration that is not bad, but the drops were rather hard, not just an ease back in a plain, orderly test. Volume was lower, so no overall dumping, but some of those leaders in FAANG were dropped, e.g. AMZN, sold on higher trade.

All this points to a market that broke higher to start a third upside leg off the lows was immediately tested at the start of the following week. As noted earlier, a test was expected, but in some aspects this selling was more than an easy fade. Thus, in one move, it is time to hold and make the break back upside. Hey, as I said over the weekend, if you sell off as the indices did then you can expect some struggling on the move higher.

Have a great evening.

End part 1
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