Wednesday, January 30, 2019

The Daily, Part 1, 1-30-19

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1/30/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: UCTT
Entry alerts: FIVN; NFLX
Trailing stops: None issued
Stop alerts: None issued

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Market Summary Video, Plays and Play Videos, and Play Table with play annotations will issue Wednesday, Weekend.

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- BA, AAPL fuel a strong early move, FOMC/Powell toss gas on the fire.
- Earnings? The right stocks are announcing big. Fed? Exits stage right for now. Trade? We will see.
- DJ30 surges, already at the 200 day SMA. The other indices are just cracking out of the top of the range or still inside the range.
- FB trying to keep the earnings surge going even as other afterhours names are down afterhours.

Two down, one to go.

Stocks started the session higher thanks to AAPL earnings the night before (where Tim Cook sang 'all our troubles are behind us') and BA blowing away grossly mispriced expectations. Earnings: check.

Then it was Chairman Powell's time, the second major hurdle of the week. The FOMC wrapped the second day of its rate hike/balance sheet meeting. It left rates steady (2.25% to 2.50%) and altered much of its statement. The Fed reiterated it would be patient concerning its next move whether a rate hike or further balance sheet reduction. This is warranted because of the global economic issues, the trade situation, and overall mild inflation. FOMC: check.

The already positive markets exploded higher, adding another third to half on top of the session gains. The move peaked with one hour left, faded some, but held onto fairly impressive moves, particularly for the large cap indices.

SP500 41.05, 1.55%
NASDAQ 154.79, 2.20%
DJ30 434.90, 1.77%
SP400 0.62%
RUTX 1.05%
SOX 2.87%
NASDAQ 100 2.64%

VOLUME: NYSE +9.5%, NASDAQ +22%. NYSE trade was still, despite all the excitement, below average. NASDAQ trade moved back above average, but even so it was lower than the Monday selling volume.

ADVANCE/DECLINE: NYSE +3.9:1, NASDAQ +2.3:1. Good but overall still more of a large cap day.

Fed specifics

The Fed made no reference to gradual increases in rates; that line was removed. The Fed also removed a reference to 'risks are balanced.'

There was no change to the Fed's economic outlook (slower than 2018 but still solid). Instead, the change was in how the Fed described its policy at this juncture.

Stocks shot higher. The question was whether they could hold the gains once Powell started answering questions.

It did. Powell successfully tap danced for the markets. In a nutshell the Fed feels the economy remains expansionary and in good shape, but there are 'crosscurrents' that warrant caution and patience. Ah yes, patience. Those that word count claim Powell uttered 'patience' -- or some derivation thereof -- eight times during his comments.

Back to crosscurrents. Trade, global economics, Brexit, shutdown lingering effects were all thrown into the 'crosscurrents' category. These are not short term issues, something Powell noted in saying they will remain for an extended period of time. As the Fed views these as serious issues impacting its policy actions, and as they are to be impacting the US economy (and thus price stability and growth as per the Fed's mandate) for an extended period of time, by extension the Fed will be out of the picture for an extended period of time.

What about the balance sheet? Well, Powell still wants to get the Fed balance sheet back to zero, but he also realizes it is not a cold turkey event. He hit the market in October with a jolt of reality and the market, addicted to FOMC crack, went into hysterical withdrawal. So, Powell is working on a stair-step approach, exposing the market to reality briefly, adjusting attitudes and conditioning it, but then pulling back to let the market recover. Or in this case, explode higher. Powell remains committed to getting the Fed back to the mundane role of adjusting rates as its method of affecting its policy mandate, but he is also being pragmatic and realizes it is a process, not just an event of doing it.

Does that mean Powell is now a Yellnanke (Yellen fused with Bernanke)? One could conclude he is bowing to the markets, but he has not gone full frontal Fed cowering. At least not yet. Thus, at some point, the market will have to deal with the Fed once again. Not today, however, or tomorrow, or the next few months. Free at last. Again, Fed: check.

Trade: Will it be checked off as well?

Now the issue is trade with the US/China latest round starting Wednesday. Okay, earnings are also still big: FB beat afterhours, AMZN still to come. But the trend in the big names is thus far good enough to more than keep the market moving higher.

The trade issue is one of the Fed issues. Are expectations of a meaningful deal too high? Not sure if they are, but I do think that a meaningful deal is not that likely in terms of IP theft, etc. If that view is the common one, then perhaps the lack of a serious deal this week does not hurt. It is the one element, however, that leaves the possibility for market upset, and thus should not be ignored -- as it was Wednesday.



Wow. It wasn't Friday and stocks posted strong gains. Perhaps that routine change will work to keep this gain. It was a large cap day given large cap earnings drove the car. The midcaps are leaders but took a back seat.

DJ30: BA and AAPL earnings gapped DJ30 higher and it rallied over 25K and through the 200 day SMA intraday. A bit of a fade closed the Dow right on the 200 day. In one move DJ30 is at next resistance, pretty much right in the middle of the October/December trading range. They broke out the Dow 25K hats on CNBC, always a great move. 25K was the next resistance and this news took the Dow right to it. After a 1.5 week lateral consolidation, however, typically a strong move would continue for more than just one session, even if it was a big one.

SP500: Up nicely as well but not skewed as much as DJ30 with its AAPL and BA heavyweights. Broke to a new recovery high over the prior two Friday peaks. Volume rallied 10% but it was still below average. Seriously? The buying was not totally unleashed in a rush into stocks. No sellers of course, but it was not a buy across the board.

NASDAQ: NASDAQ moved up to the intraday high on the recovery, but did not move past those highs. At the top of the two week range, no breakout, however. Volume stronger, back over average, but still less than the selling volume from Monday. Okay, broke higher off the 50 day MA, a good initial move -- again. Now it actually needs to move through and toward the 200 day SMA up at 7452.

SOX: After the prior week's strong move, a 2-day test this week and on the third session SOX moved up to near the Friday rebound high. Still below the 200 day SMA and will have to face that as next resistance at 1300 (closed at 1272)

SP400: Midcaps edged over the two week lateral consolidation. Held up very well in the lateral move, decent upside break though the domestic tied stocks lagged on the session. Still solid and its time likely comes again.

RUTX: Same action as SP400, moving just over the top of the lateral range.


FAANG: AAPL of course gapped on earnings, gapping right into resistance. AMZN jumped off the 50 day MA back to the upper half of its 4 week range. FB did the same and surged afterhours to 167.50 (closed at 150ish). NFLX moved up through the 200 day SMA. GOOG was similar, gapping off the 50 day SMA and moving into the upper portion of its January range.

Chips: AMD surged on results, following the XLNX, LRCX earlier earnings moves; those two continued higher as well. MU held steady but RMBS gapped higher, rallying to a new recovery high. SIMO trying to launch off the bottom of the pattern. Overall the group remains very good.

Software: Still a good group, just not as strong top to bottom. NOW broke higher and afterhours on earnings is up another 10 points. DATA continues working back up off the 10 day EMA test. CRM bounced off the 20 day EMA close. SPLK surged off its 10 day EMA test. NTNX, ZS still in good position to break higher. MSFT gapped and rallied back through the 200 day MA intraday, then afterhours gapped back below the 200 day SMA to the Tuesday closing level on that day's selloff.

Manufacturing/Machinery: BA the standout of course. The others, so-so. UTX, MMM, CAT, CMI -- decent but nothing great. EMR was up big. Strong gap and run, strong volume.

Financial: Blah. JPM nothing, WFC the same. BAC down, C up. GS edging higher. V jumped on earnings originally, sold off after the initial surge. Fed day, Fed is dovish, not great for financials.

Retail: FIVN jumped higher on volume and we picked up some. DDS still a decent pattern. COST holding steady below the 200 day SMA. MIK, a downside play, gapped fairly sharply lower and we didn't chase it to our chagrin. Very mixed group.

Materials: Edged higher but nothing near great. LPX sliding higher on no volume. CX, TREX, USCR -- nice patterns, just not breaking higher.

Gold: HMY testing a breakout move. SA a nice cup with handle.


Stats: +434.90 points (+1.77%) to close at 25014.86

Stats: +154.79 points (+2.20%) to close at 7183.08
Volume: 2.56B (+22.49%)

Up Volume: 1.95B (+1.303B)
Down Volume: 595.55M (-834.45M)

A/D and Hi/Lo: Advancers led 2.3 to 1
Previous Session: Decliners led 1.23 to 1

New Highs: 31 (-3)
New Lows: 28 (+2)

Stats: +41.05 points (+1.55%) to close at 2681.05
NYSE Volume: 839.863M (+9.42%)

Up Volume: 673.701M (+219.131M)
Down Volume: 162.813M (-134.67M)

A/D and Hi/Lo: Advancers led 3.85 to 1
Previous Session: Advancers led 1.28 to 1

New Highs: 70 (+18)
New Lows: 14 (-3)


VIX: 17.66; -1.47
VXN: 21.18; -2.68
VXO: 18.47; -1.63

Put/Call Ratio (CBOE): 0.89; 0.00

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: 2.679% versus 2.710%. The 10 year rallied, bonds overall held steady-ish.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.710.5 versus 2.738% versus 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: 1.14924 versus 1.14351. Euro surged back up near the 200 day SMA where it failed the second week of January.

Historical: 1.14351 versus 1.14285 versus 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: 108.96 versus 109.364. Dollar looks as if it is rolling over after 2 weeks laterally after the rebound bounce.

Historical: Last below 109 in June 2018: 109.364 versus 109.180 versus 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: 54.23, +0.92. Breaking higher over the 2 week trading range formed around 52.50.

Gold: 1315.50, +6.60. Gold continued the 4-session breakout move. It did, however, gap to a doji. Perhaps all the good news near term is priced in. Still, a dovish Fed set up the move and it broke higher anticipating the Fed's move. Or lack thereof.


Again, earnings in the right stocks are good enough for the market. The beats are stellar enough that they receive the focus even if there are still an uncomfortable number of top line misses still being reported. If the big names beat impressively, they others just do not count.

That continues afterhours Wednesday. FB beat big and is up 17 points over the close. The rest of the reports? Not so blowout. MSFT missed the top line and is lower. TSLA a bottom line miss; lower. V Beat but is lower. PYPL ditto. Can FB carry the load on its own? Going to find out.

Big move on earnings and then the Fed tossed gasoline on the upside fire. DJ30 posted a clear breakout, the other indices are toying with it but no super powerful moves. After this kind of move on specific Fed news the market often shows some retracement.

That works. We didn't buy much because the reverberations post-big news such as the Fed can work counter to the initial move. That is okay. If this is truly a good new move, a new break higher in a move that will push the indices to new highs given the Fed is flying south as a dove, there will be good opportunities to enter.

Have a great evening!

End part 1
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