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1/28/2019 Investment House Daily
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Targets hit: None issued
Entry alerts: NBEV
Trailing stops: None issued
Stop alerts: PG; VZ
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- Once again the large cap indices cannot hold a break higher.
- CAT, NVDA weak outlooks drop the large caps while midcaps and chips hold the line.
- Big earnings, FOMC, trade negotiations all loom over the market, and afterhours China's comments send futures lower.
- Large cap indices set to start back at testing the prior resistance after testing it and bouncing Monday.
For the second week following an upside Friday, the stock market started downside and rather hard downside. CAT missed on earnings and warned for 2019, pointing East to China as the issue. Futures were already lower then at 9:00ET NVDA warned about the quarter, lowering its revenue guidance as a result of slowing in . . . just about every business unit. There was nothing even close to a silver lining in the release.
CAT telling the tale of global slowing, something not surprising really, but the slap of reality always stings even if it should have been expected. NVDA was the shock -- after LRCX and XLNX pretty much said it was the bottom for the semiconductors. The market was definitely not ready for this and it showed it.
Stocks gapped lower, found a lower low midday, then crawled back upside. Never made positive though DJ30, SP500 and RUTX cut the losses in half while NASDAQ trimmed 50 points from a 120 point loss. Not massive reversals from the gaps lower, but held the support levels and did manage to work back up after that test.
SP500 -20.91, -0.78%
NASDAQ -79.18, -1.11%
DJ30 -208.98, -0.84%
SOX -2.09% (big ups, big downs)
NASDAQ 100 -1.33%
Definitely not ready to surge higher, and after the CAT earnings and NVDA warning, waiting on some of the other heavy hitting earnings for the week as well as the FOMC rate decision and Powell's press conference, the trade talks starting Wednesday, and tons of economic data culminating with the January jobs report Friday.
VOLUME: NYSE -5%, NASDAQ flat. After volume moved higher on the Friday gains it backed off on the selling and some pretty bad news.
ADVANCE/DECLINE: NYSE -1.2:1, NASDAQ -1.8:1. Yawn. Not any serious selling.
Basically, a flashback to the prior Friday and first day of the following week: a rally followed by a sharp drop back to support the next session. As noted, support held, but the failure to extend Friday's break higher after testing the initial rally through resistance at best keeps the indices in a consolidation phase over support.
Something will act as the catalyst for the next move, and of course there are enough potential catalysts this week to fill a barn. If earnings from the big names AAPL, AMZN, FB are good, if the Fed's Powell tap dances to the markets' liking again, if the trade talks go well -- perhaps the market can hold support and rally higher.
Perhaps. The failure to hold the Friday move yet again, the truly bad news from CAT and NVDA in our book tilts the risk negative. Another bad piece of news and the support that was the prior resistance could snap, leading to the test of the December low.
We really contemplated closing out upside positions and waiting, at least for most, keeping some upside exposure but really pulling it back in. If the moves are not good tomorrow -- and they may not be as no answer to the big 3 issues (earnings, trade, Fed) will come Tuesday -- it is likely the prudent thing to limit exposure. Indeed, even if the indices and stocks do move higher off the Monday gap lower, depending upon the leadership and the strength, it likely is still prudent to use the move to take some upside off the table. If things work out, then we make some gain and we will have opportunity to buy in again. If things deteriorate, well, then money is preserved.
Is there another piece of bad news? Afterhours that may have come from the trade area. China reportedly says it will 'resist' structural changes, including eliminating subsidies paid to its domestic industries. SPY fell from 263.55 to 262.50.
The large cap indices were disappointing, at least holding the October/December range and 50 day MA's they broke through 6 to 9 days prior.
SP500, NASDAQ, DJ30: All gapped lower, tested one of the 50 day MA on the low, rebounded to at least cut some losses. A test of support and rebound, not a bad thing other than it just finished a test, made a gap higher, then gave it all up. As noted earlier, the probability is at best they continue consolidating and try to set up a new move.
SOX: The recent leader, SOX gapped sharply lower, held well over the 10 day EMA, then rebounded to cut the losses. Overall, not a bd pattern, testing the outsized moves Thursday and Friday that took SOX over the early December high. Again, not bad.
SP400: The strongest of the indices, the midcaps tested lower as well but recovered most of the losses. Still quite solid, and solid performance in the midcaps is not a bad economic indication.
RUTX: Similar to SP400, reaching lower toward the 10 day EMA and the 50 day MA as well, recovering much of the loss. Not as strong as the midcaps, but quite solid enough action.
FAANG: Not bad, not great. FB tested the 10 day EMA on the low, showing a doji and modest loss. Not bad. AAPL ahead of Tuesday after the close earnings showed a doji with tail at the 10 and 20 day EMA. Not bad. AMZN gapped back to the 50 day MA, where it held, showing a doji with tail similar to last Wednesday. Not great. NFLX Gapped lower, rallied to hold the 200 day SMA. Not bad. GOOG gapped and sold to the 50 day MA, barely rebounding. Not great.
Materials: Not bad. USCR (concrete ) breaking higher in an 8 week base formed off the lows. LPX trying to break higher in a 5 month double bottom with handle base. TREX in a 5 month double bottom with handle base as well. This is quite interesting.
Software: Held up pretty darn well all things considered. ZS, NTNX, COUP, NOW unflustered. DATA took a 2.3% hit after a 6% Friday gain. SPLK good enough, even CRM holding up well.
Financial: Held up very well. BAC held steady, C as well. JPM solid. GS looks quite good to break higher.
Semiconductors: NVDA was hammered and some sold with it but not many cratered. AMD off 8% but held the 50 day. MU gapped lower but recovered decently as did AMAT. UCTT rallied. ENPH rallied. RMBS gave up a gain but is still solid. LRCX gapped lower but recovered to a modest gain. Still showing lots of strength.
Pot: Getting nicely high for us. CRON 15+%. CGC +4.7%. Pot stocks helping blunt the rest of the market pain, right?
Drugs: No relief for big pharma. PFE -2.73%, dumpster diving below the 200 day SMA. LLY, MRK hung on at support, barely. AMGN dove lower in biotechs while BIIB tested the 20 day EMA. Smaller decent enough, e.g. EXEL.
Energy: Service stocks still solid. SLB working laterally after the gap through the 50 day MA. HAL doing the same.
Metals: Gold still moving up, e.g. SA. HMY broke sharply higher, AU gapping on top of a good move. Steel not bad, e.g. AKS, RS, but aluminum struggling.
Machinery/Manufacturing: CAT burned up several of its 9 lives. CMI managed to hold near the 200 day SMA after gapping and selling off. TEX, EMR, MMM not bad but have to show they can move.
Retail: FIVN tried to extend the break higher, faded a bit, still solid. COST sold lower but recovered positive. DDS tested over the 50 day MA after a solid Friday break through that level. EBAY moved over the 200 day SMA on the close for the first time in a long time. DLTR in a nice 3 week pennant. WMT testing the 50 day MA after a 4.5 week recovery.
Stats: -208.98 points (-0.84%) to close at 24528.22
Stats: -79.18 points (-1.11%) to close at 7085.68
Volume: 2.45B (+0.41%)
Up Volume: 972.98M (-937.02M)
Down Volume: 1.41B (+888.2M)
A/D and Hi/Lo: Decliners led 1.79 to 1
Previous Session: Advancers led 2.57 to 1
New Highs: 40 (-1)
New Lows: 35 (+14)
Stats: -20.91 points (-0.78%) to close at 2643.85
NYSE Volume: 818.241M (-4.95%)
Up Volume: 320.932M (-346.733M)
Down Volume: 482.695M (+293.702M)
A/D and Hi/Lo: Decliners led 1.21 to 1
Previous Session: Advancers led 3.3 to 1
New Highs: 40 (-10)
New Lows: 22 (+17)
VIX: 18.87; +1.45
VXN: 23.43; +1.65
VXO: 19.74; +1.49
Put/Call Ratio (CBOE): 0.99; +0.24
Bulls and Bears:
Bulls continued a bounce back in the forties with bears dropping back near 20. Then the market sold back this week. Still, the crossover occurred and that is a bullish indication. The market has made a move up, is testing, and then the question is if it can continue from there.
Bulls: 45.4 versus 42.1 versus 34.8
Bears: 21.3 versus 25.2 versus 29.4
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: 45.4 versus 42.1
34.8 versus 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: 21.3 versus 25.2
29.4 versus 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: 2.738% versus 2.748%. Holding at the 20 day EMA in a continued test of the run to early January.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.748% versus 2.734% versus 2.741% versus 2.75% versus 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: 1.14285 versus 1.1407. Slow move up through the 50 day MA awaiting the Wednesday FOMC decision.
Historical: 1.1407 versus 1.13134 versus 1.13830 versus 1.13652 versus 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: 109.180 versus 109.545. Dollar nosing over after 2 weeks of a lateral move.
Historical: Last below 109 in June 2018: 109.545 versus 109.757 versus 109.58 versus 109.651 versus 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: 51.99, -1.70. Struggling, slipping below 52.50 and at the 50 day SMA. Still in the lateral move but at the point it needs to hold.
Gold: 1303.10, +5.00. Added a bit more to the Friday breakout over the January consolidation.
A disappointing move for the upside, starting another week with a significant loss. Once again the indices held support, but instead of extending a break higher following a breakout test, they are back to holding support and trying to consolidate for another move. Not enough confidence in the outcome of earnings, the FOMC, trade talks, and economic data. Thus, the slide back to test support.
SOX, SP400 are much better off; leaders. But there are lots of other stocks outside of these groups. Again, can SOX pull the rest of the market with it? Thus far it is a heavy load.
Afterhours stocks are not getting any upside help as noted earlier. China's commentary regarding what it will and won't agree to in the trade talks is undercutting futures with S&P 500 futures off 12.5 points from the close. The trade issue already impacting the market even before the trade talks. Likely China is just trying to beat Trump to the punch. Trump typically makes some bombastic comments just ahead of any negotiations so China is taking the initiative. Still, it hurts a fragile market.
Thus, the large cap indices could find themselves back at support awaiting AAPL's earnings afterhours. SOX, SP400 not bad at all and several sectors looking solid (e.g. chips, financials, gold, materials). That holds out promise, but the market appears fragile with all the potential negative catalysts and the inability of the large cap indices to hold moves off support. Perhaps they are just trade vulnerable and the midcaps will lead given their more domestic orientation. Perhaps, but if the large caps are not in the game, the market outside of some pockets will struggle. In that event we will be wary and if the action in the big names does not improve, close positions that are vulnerable.
Have a great evening!
End part 1
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