Sunday, January 13, 2019

The Daily, Part 1 of 3, 1-12-19

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1/12/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: CRON; NFLX
Entry alerts: None issued
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.

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.

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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.


- Better views of trade situation and Fed overcome other substantial concerns.
- Indices up to resistance, ABCD patterns, but rally leaders are set to break higher again.
- SOX breaks through resistance late week. Leader or lone wolf?
- Coming to the moment of truth for the market inflection point with earnings possibly the catalyst.

Another week higher slowed at the end as the indices bump at resistance. Still . . . the resistance did not immediately repulse the upside move. Instead, the indices are sliding laterally just below, resting after a solid second leg higher. Or, in the case of SOX, moving right on up through resistance. Not a bad reaction at all.

SP500 -0.38, -0.01%
NASDAQ -14.59, -0.21%
DJ30 -5.97, -0.02%
SP400 0.13%
RUTX 0.14%
SOX 0.97%
NASDAQ 100 -0.30%

VOLUME: NYSE -11%, NASDAQ -6%. Not bad price/volume action on a flattish day; no heavy selling as volume backed off below average even farther.


Indeed, many of the rally's early leaders are testing while others follow their early lead. AMZN, TEAM, NOW, CRM -- solid moves higher, now testing laterally, setting up the next move.

While the resistance confronting the second leg of the rally is still there and is serious, the action thus far suggests these leaders can break higher and -- lead -- once again. We will definitely be looking at new positions on them as the make the next break higher. Nothing like concentrating on winners; that really leverages your gains when they are in a run.

Trade 'progress' (read not walking away from each other in anger), the Fed remaining and reiterating pseudo-dovishness, a series of upgrades were sufficient to overcome:

1. Earnings warnings from some key companies (e.g. AAPL, M, AAL)
2. Continuing weakness in US, EU, and China economics (no matter what US jobs were)
3. Government shutdown hitting a record and Fitch or one of the other less than unimportant credit agencies threatening to downgrade US credit (though I still view the shutdown as an overall positive)
4. Retail holiday sales missing all over the board
5. Brexit vote next week hitting another major snag

Nope, no negatives here. The bottom in stocks is surely in, everything will no doubt be resolved perfectly, and new index highs are the only logical outcome. It can happen.

It can also be that the sell algos kick back in and the ABCD patterns in the indices send stocks back down -- they are at resistance after all.

Prudent to be ready for either despite all of the excuse making for the October through December selloff that capped a yearlong top formation. You hear it hourly now, e.g. it was trade, it was Powell, it was China's economy -- yes, it was all of those but I would argue those were triggers to the top that was built the prior 9 months. I have been through enough of these to know that this kind of apologist rationalization for a selloff is based in a lot of hope and a lot of talking the book by large funds. They truly want the market to proceed higher so more money will come back in, more money they can use to make more fees.

Money flow. Yes, it is coming back. This past week $6.2B into stocks, not bad after those back to back weeks of record outflows. Bond funds gained $7.2B -- not everyone is enamored with moving back into equities. Gold gained $1.1B. Bullish sentiment rebounded as noted Thursday, and with it money came back. Rapid moves both directions though money coming in is always good for the upside -- cannot get the latter without the former. It can also, however, indicate sentiment is too scattered as money flip-flops back and forth.

In any event, this is a classic inflection point, the old lick log as southern lawyers like to say. There will be a break higher continuing the rebound for a third leg or this is it for the relief move. Again, it is prudent to not get enamored with the upside or the downside, play the moves that are there, take gain after good rallies, be ready when the move reaches potential stall areas (as now), and be ready to act with current positions if the move waffles further and act with the plays in waiting if the move breaks higher again or rolls over.



As noted, each index outside SOX has a potential ABCD downside pattern set up. That is the potential negative. On the other side of the ledger, the initial leaders in this move, e.g. AMZN, TEAM, are setting up for a new move higher and look quite good. If the move breaks upside again, we will be all over them as they make the moves.

SP500: SP500 is still just below the 50 day MA, the bottom of the October/December trading range, and the 78% Fibonacci retracement of the December selloff. Those are all CLASSIC levels for the ABCD pattern to consummate. We will see.

DJ30: Carbon of SP500, just below the same trio of resistance though the 61% Fibonacci retracement versus the 78%.

NASDAQ: Very similar pattern here with NASDAQ actually bumping the 50 day MA and the bottom of the trading range, also at the 78% Fibonacci retracement of the selloff from mid-December. It has going for it some big names and not so big names setting up for it again, e.g. AMZN in the former category, TEAM, NOW in the latter.

SP400, RUTX: Both are smaller versions of SP500/DJ30, but are actually bumping the 50 day MA, 61% Fibonacci retracement of the selloff, and bottom of the October/December range. They also have ABCD downside patterns just as the large cap indices.

SOX: Unlike the other indices, SOX is moving through resistance, breaking through the 50 day MA Thursday and continuing higher Friday as part of a move just over a week old. SOX broke below the yearlong top in December, recovered, sold back through to start January. Now it has rallied back through the bottom of the range and is over the 50 day EMA. Trying to repudiate the top. SOX has lagged the overall market a long time, SOX is an important leading indicator. If it continues to perform well, the rest of the indices could shake off the ABCD patterns and continue their relief move. Whether they can turn it into something more will show up with better and better patterns.


Seeing more stocks perform with the market's second leg higher in the bounce. Initial leaders are resting while newer areas such as semiconductors take the lead. Earnings start this week; some may be extended with the last move, others such as AMZN are setting up with a rest.

Semiconductors: Like the setup of AMD, AMAT, SIMO, MU. Others such as ON, QRVO, INTC have moved up already to some resistance.

FAANG: AMZN is in a 1-2-3 test of the 2 week move to near the 200 day SMA. FB is also working laterally after clearing the 50 day MA for the first time in 6 months. NFLX surged up to and through the 200 day SMA. GOOG is also in a very nice test of its last move, showing a doji at the 50 day MA. These look good, ready to bounce again or give it a shot. AAPL made it to the 10 day EMA again, sixth test since it started the downtrend early November. Likely time for it to bounce a bit higher in relief.

Software: Some early leaders setting up well in this group as well, e.g. TEAM, NOW, COUP, DATA. TTWO not bad. Others need some work, e.g. ADBE, FFIV. Still a solid group.

Retail: Many were hammered Thursday on the disappointing holiday sales. Not much recovery from M, KSS Friday. ROST not bad, ULTA recovering from the late December low. HD, LOW set up well.

Drugs: Big pharma still not that inspiring outside LLY. MRK, PFE not in that league right now. Big biotech taking a breather (AMGN) while other biotech continues to improve setups, e.g. IMGN.

Transports: AAL warned Thursday but it did not do a lot of damage to the airline group. Trucking continues to try to complete new bases, e.g. ODFL, SAIA. Rails are on a 3 week move -- after sharp selloffs.

Financial: Still mostly testing after good moves into the past week. After a week of rest they are in decent positions for a new break higher, e.g. GS, JPM, WFC.

Metals: Some more improvement as they try to break trends e.g. FCX, holding over the 50 day EMA after moving up through it Wednesday. CENX is also showing similar solid action. HMY in gold is in a pretty decent 2 week lateral move.


Stats: -5.97 points (-0.02%) to close at 23995.95

Stats: -14.59 points (-0.21%) to close at 6971.48
Volume: 2.06B (-5.94%)

Up Volume: 1.15B (-160M)
Down Volume: 886.71M (+35.63M)

A/D and Hi/Lo: Advancers led 1.18 to 1
Previous Session: Advancers led 1.19 to 1

New Highs: 26 (+8)
New Lows: 13 (-1)

Stats: -0.38 points (-0.01%) to close at 2596.26
NYSE Volume: 799.32M (-10.57%)

Up Volume: 450.828M (-51.118M)
Down Volume: 318.664M (-62.242M)

A/D and Hi/Lo: Advancers led 1.31 to 1
Previous Session: Advancers led 1.57 to 1

New Highs: 16 (+5)
New Lows: 5 (-2)


VIX: 18.19; -1.31
VXN: 24.78; -1.13
VXO: 19.45; -1.69

Put/Call Ratio (CBOE): 1.08; -0.05

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: 2.699% versus 2.733%. Bonds tested into Thursday, with TLT landing on the 20 day EMA. Friday a doji just over that level, perhaps showing bonds are ready to rebound.

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

EUR/USD: 1.14699 versus 1.15075. Big break higher Wednesday to just over the 200 day SMA, then a pause, then a fall Friday back down to the 10 day EMA. First breakout attempt in question.

Historical: 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: 108.563 versus 108.332. Still bouncing up and down in a small range below the 10 day EMA, trending lower below that MA since breaking the range downside in mid-December.

Historical: Last below 109 in June 2018: 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: 51.59, -1.00. Rallied up to the 50 day MA into Thursday, tried higher Friday but stalled and faded to a modest loss. First try higher and the question is whether it keeps trying or is done. Might be done, though MACD did put in a higher low at the December lower price low.

Gold: 1289.50, +2.10. Six sessions in a lateral rest over the 10 day EMA after the rally from early December.


Another week and a second leg up for the stock indices. Powell spoke a second time as well and managed to avoid upsetting the move he helped fuel the prior Friday with his 'I'm listening' comfort words. The market focused on the better news, ignored the worse news.

It now won't have much more room to do that with earnings approaching. Combine that with the runs in the indices setting up ABCD patterns at resistance. Pretty serious decision point/inflection point/lick log ahead.

C gets things going Monday, JPM and WFC Tuesday, and NFLX helps get NASDAQ earnings going on Thursday. Stocks have enjoyed a decent move higher into results, by some accounts the best in 5 or so months. Sometimes a run into earnings take out all the fuel in the tank. In this kind of selloff and recovery they can add more fuel.

Q4 earnings are an enigma. S&P earnings forecasts predominantly fall in a range from 11% to 16% growth. Pretty hefty, particularly in light of last week's sneak peak with warnings from AAPL, AAL, M on top of earlier warnings from FDX, CAG, STZ, and MU. There is definitely room for upset. But, as BBBY showed, there is also room for upside surprise delivering upside stock moves.

Still, there are signals some are not doing that well other than the out and out warnings. Anyone receiving the emails from Hewlett Packard asking if you want a PC delivered the next day? Pushing hard to start the new year and generate some sales.

There are several issues merging next week and the following weeks. Obviously. A move to resistance has good setups downside as well as upside. We have some current plays and will add more. As for current positions we have let them work, taking gain on the way up. If they continue to work, obviously let them. If that happens, then the market is continuing upside and we will enter more positions on AMZN, TEAM and some other stocks as well.

Have a great weekend!

End part 1
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