Wednesday, January 09, 2019

The Daily, Part 1, 1-9-19

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1/9/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: VRSN
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Trailing stops: None issued
Stop alerts: None issued

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- Fourth day upside with growth definitely leading.
- Fed doves are flying -- in flocks
- Solid 4-day rally, but with success comes resistance.
- No signs of the move struggling, but everyone has forgotten the issues so just worth being attentive.

Again the indices started higher and closed higher with this upside move skewed toward the growth indices. NASDAQ was one of the market leaders, and its move took it to 6985 on the high, effectively at the 50 day MA and the 7000 level we were watching as its first test upside. AAPL took on some more bad news with reports of a 10% production cut -- another production cut -- yet it managed to move higher 1.7%.

SP500 10.55, 0.41%
NASDAQ 60.08, 0.87%
DJ30 91.67, 0.39%
SP400 0.91%
RUTX 0.86%
SOX 2.52%
NASDAQ 100 0.75%

VOLUME: NYSE -7%, NASDAQ +1%. Both below average as volume continues to tail as the move reaches its fourth session.


SOX led the move, gapping upside and rallying to the 50 day MA. Some good moves from several beaten down chips, e.g. AVGO, SWKS, LRCX -- good moves despite the downgrade of SWKS. That is a sign of strength right as SOX moves to potential resistance as well. Indeed, SP400 and RUTX are closing in on the 50 day MA.

Obviously, this is a good upside move, and those moves eventually run into resistance. Again, NASDAQ is there, SOX as well, while RUTX and SP400 are close. SP500 and DJ30? They are still a bit farther away from the 50 day MA but are very close to the bottom of their October to December ranges, ranges that collapsed in that December selloff. Key resistance as well.

But, will resistance matter with a now cooing dove Fed? Powell and his henchmen have moved from 'we are going to hike and don't give a damn as to the results' Eastwood impressionists to yet another in a string of Barney Fifes.

The Fed doves cometh.

Wednesday three Fed members considered hawkish (Evans, Bostic, Rosengren) tried to outdo each other in a game of 'who is more dovish?' Bostic said rates were near neutral and the cautious tone of businesses would act as its own inflation governor. In responding to a question of whether the next act would be a hike or a cut, Bostic responded 'yes,' that he was 'open to a rate cut' in the right circumstances.

Evans said he still sees three hikes in 2019 but there were no inflationary pressures and the Fed could afford to wait. He still wants to go 'slightly above neutral' -- it would seem he can only coo so much.

Rosengren was more concerned with China's economy than the US, saying it faces a combination of problems and could slow even more. That was the Yellen excuse for no hikes in rates in 2016. He said the Fed was 'mildly accommodative' and Rosengren is 'perfectly content to stay there.'

The most recent Minutes showed some felt a December rate hike was not good policy, some said downside risks increased, many believed patience on further hikes would be prudent. As for markets, the Fed noted trade as an issue as well as global growth, Brexit negotiations.

Basically a dovish tilt but not giving up entirely on rate hikes and going past neutral. It was, however, a sea change, in appearances at least, from October. Again, from Eastwood tough guys and gals to Barney, or Woody Allen.

Even with all that allegedly more dovish commentary (though they could not and cannot top Yellen's -- I mean Powell's -- market-turning tap dance performance that rebooted the rally), stocks did not surge. The finished stronger, but in line with recent gains. Of course, working on a fourth session upside, some of the energy has dissipated on this leg.

Freedom has left Europe.

France and Macron are moving to end all protests in the country. Sweden is arresting people posting comments detrimental to migration. Now we can see the value of the first amendment. European countries don't have anything like it, yet no one really worried because they were free countries, right? Wrong. In Europe, free speech is great until you say something the powers don't like. Then it is gone. We are seeing the headwinds of that movement here in the US where new belief that those who are considered bad have no right to speak because from bad springs worse -- or something like that. We are on a slippery slope when thugs in black masks attack and beat people just because of what they are wearing or saying. We are close.

Note this is coming at a time when economies are starting to roll over. Germany has released atrocious economic numbers this month. The UK saw auto sales fall the most since the financial crisis. France is, well, things are so bad in France that a group called yellow jackets are involved in massive protests, so much so the powers want to ban protests as noted earlier. There is unrest starting, some already boiling, and crackdowns by the powers will not extinguish it, not in even allegedly free countries such as those in Europe.

Fitch threatens to downgrade US credit over the shutdown.

That is a typo, right? The way this government spends, Fitch should threaten to upgrade credit since all the government does is spend into more and more debt. Yes, the credit agencies are still as pathetic as they were ahead of the financial crisis. It is farcical that anyone would listen to them at all.



SP500, DJ30: Both moved higher for a fourth session, both closer to but still below the 50 day MA, both just below the bottom of the October through December range. Important resistance near at hand, thus far not showing real slowing, just a bit winded after four sessions.

NASDAQ: Gapped and rallied to near the 50 day MA and 7000, marking the bottom of the October to December trading range. Nice second leg higher in the rally, now at its first serious test point.

SOX: Chips continued upside, moving up to the 50 day MA by the close. Some big names helped out, e.g. INTC, AVGO, MU. Could provide needed leadership if SOX can break higher through this 50 day MA resistance.

RUTX: almost at the 1450ish level that represents resistance on this move. That would put RUTX at or just above the 50 day MA's, more or less, basically the same test all the indices are facing after four very good upside sessions in the renewed rally.

SP400: Close to resistance as well at the 50 day MA, trading range bottom. Again, same test.


Several groups are moving higher though hard to classify as anything near leaders. Chips are in some cases quite interesting, moving higher on bad sector news.

Software: Some stronger, some flattish. SPLK added a bit more, TEAM, MSFT as well. TTWO, COUP, FFIV kind of nowhere.

FAANG: AMZN took a day off in a tight range. FB added another 1+% on its move over the 50 day MA. NFLX held flat but after a good move higher. GOOG flat. AAPL added 1.7% to the 10 day EMA even with another production cut.

Chips: Managed to hold the move today. AVGO strong at +4%. AMD testing nicely. AMAT decent at the 50 day MA. NVDA similar to AMD, i.e. with a pretty nice test. LSCC broke higher by 4% as the AAPL-related stocks did quite well.

Retail: After good moves taking a breather. TJX, ROST, WMT pausing.

Drugs: Tried higher to continue the move, faded to flat e.g. AMGN, BIIB. PFE, MRK in big pharma still going nowhere yet.

Transports: Some interesting action as KSU moves up after breaking the 50 day MA. JBHT positing a nice move.

Financial: After a pause Tuesday, modest rises, continuing the move, e.g. C. On the other hand, there are some very interesting setups from WFC, GS, JPM, i.e. nice little lateral tests that could prove to be nice setups to break higher.

Metals: Improvement. FCX over the 50 day MA for the first time since July. AKS in steel continues toward the 50 day MA. RS is already to the 50 day MA. Better, not necessarily great. CENX could be different with its lateral move along the 50 day EMA.


Stats: +91.67 points (+0.39%) to close at 23879.12

Stats: +60.08 points (+0.87%) to close at 6957.08
Volume: 2.43B (+1.25%)

Up Volume: 1.59B (-110M)
Down Volume: 818.67M (+137.56M)

A/D and Hi/Lo: Advancers led 1.91 to 1
Previous Session: Advancers led 2.16 to 1

New Highs: 35 (+2)
New Lows: 8 (-10)

Stats: +10.55 points (+0.41%) to close at 2584.96
NYSE Volume: 939.011M (-7.09%)

Up Volume: 684.988M (-39.545M)
Down Volume: 236.921M (-40.514M)

A/D and Hi/Lo: Advancers led 2.09 to 1
Previous Session: Advancers led 3.41 to 1

New Highs: 12 (-2)
New Lows: 10 (0)


VIX: 19.98; -0.49
VXN: 26.42; -1.24
VXO: 21.40; -0.90

Put/Call Ratio (CBOE): 0.93; -0.04

Bulls and Bears:

Now THAT is a move. Both bulls and bears. Yes, a crossover in just about record time. Is this now indicating a bottom in stocks? Yes and no. It is an indicator that takes time for the rally to occur. That said, stocks have bounced -- modestly -- paused, and arguably in position to continue the bounce. This indicator, however, is more of a longer term indicator. As such, it suggests more than a bounce. Interesting, but need more good patterns to support a bounce; that can happen over time, and as indicated this is not an immediate, Pavlovian market response. Regardless, this was an impressive move.

Bulls: 29.9 versus 39.3

Bears: 34.6 versus 21.4

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: 29.9 versus 39.3
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: 34.6 versus 21.4
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: 2.712% versus 2.731%. TLT showing a nice doji with tail on a 4-day pullback. Set up to move back up.

Historical: the last sub-2% rate was in November 2016 (1.867%). 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% versus 3.059% versus 3.048% versus 3.065% versus 3.074% versus 3.056% versus 3.065% versus 3.116%

EUR/USD: 1.15532 versus 1.14547. Euro exploding higher against the dollar, moving up to the 200 day SMA after the doves are again flying at the Fed.

Historical: 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: 107.959 versus 108.802. Dollar turns down from the 10 day EMA after the bear flag move.

Historical: Last below 109 in June 2018: 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: 52.36, +2.58. Oil blasts through the 50 day MA and up near the 50 day MA at 52.50ish.

Gold: 1292.00, +6.10. Looks ready to move higher form the 10 day EMA after a 3-day test.


Okay, four days up on the second leg, all indices at or approaching next resistance. Compliant Fed back in -- for now. Trade talks progressing -- for now. Some new groups trying to join the groups that were stronger to begin with, though plenty of work ahead.

Then there is the shutdown that is dragging on and the inevitable speculation. Is the GOP cracking? Are the democrats overreaching?

Earnings are also coming. Are they underestimated or will they show a true Q4 slowdown? Already some warnings have hit from big names, the biggest being of course AAPL.

We have hit a point were just about everyone has forgot things went wrong in December and could go wrong again. Or, the indices just get tired after a good second leg, hit resistance, and need a rest before trying again.

Either way, we watch for a pause/test at resistance and see if the sellers hit hard or if this is just a second pause in the relief move. The indices have ABCD downside patterns no doubt, but bear market rallies can move even more than this one. So can rallies to new highs. Still do not think this will be the latter, but we take what the market gives.

Thus, we have some downside plays at the ready in the event the sellers hit hard, and continue to look at some upside if the rally continues anew -- but after a pause.

Have a great evening!

End part 1
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