Tuesday, January 15, 2019

The Daily, Part 1 of 3, 1-15-19

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1/15/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: None issued
Entry alerts: AMZN; BLUE; COUP; DATA; GOOG
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.


- NASDAQ starts to break through resistance but NYSE indices are still not there.
- Economic data not the best, a fed 'hawk' says pausing hikes and balance sheet reduction is a good choice.
- Key NASDAQ names start breaking higher from well setup patterns.
- Some say new highs, some say another rollover, but the middle ground is often fertile ground.
- NASDAQ needs to keep the move going, avoiding reversals and pulling the other indices with it.

After a sluggish but decent Monday that saw the indices continue their tests of leg 2, Tuesday saw NASDAQ take a serious lead and break higher through the 50 day MA. Not an utter crushing of that level and all the associated resistance, but a solid break upside, led by stocks such as AMZN, GOOG, NFLX, MSFT, AVGO, CRM -- quality, high volume stocks.

The NYSE indices all moved nicely higher, but they have not made the same move through resistance.


To view, click on the following links:


SP500 and DJ30 moved higher, getting closer to the 50 day MA and the bottom of the October/December trading range. Moving higher after a 4-session lateral move, but not breaking through the resistance yet.

SP400 and RUTX snugged up to the 50 day MA and the bottom of the October/December range. They too still have to make the break higher.

SOX bounced very modestly off the drop back to the 50 day MA, but it also gave up some pretty good upside intraday. Would have been good to see SOX show the same strength as NASDAQ -- in that situation you get two growth indices moving higher and thus pulling the rest of the market with them. SOX broke higher for sure, but this week it is struggling right on the heels of the upside break. The upside needs to see SOX post a bounce from here and not be too slow about it.

In sum, while NASDAQ big names rallied very well to start breaking resistance and follow SOX over the 50 day MA's, the majority of the market did not make the breakout over resistance. Some early leaders from the very start of this market bounce rested, tested, set up good positioning to move higher, and Tuesday they started moving higher (FB the day before). As we said we would, we bought them (AMZN, GOOG, DATA, COUP).

Now it becomes an issue of whether the resistance wins out over the NYSE indices and stalls the bounce, or if NASDAQ can hold its break and continue higher with the NYSE indices to follow.

Market psychology.

It is interesting. There are those who today are saying any bear market stocks experienced is over (CNBC's Cramer). There are those who see the NASDAQ FAANG et al Tuesday moves as being overbought (mostly citing NFLX and its blast higher). They are in almost violent opposition with the other side based upon the commentary heard.

What strikes us is that this is not necessarily a zero sum situation. The resistance is serious. The yearlong market top in 2018 is very serious. What the two sides appear to be ignoring is the middle ground. At this juncture we are still not saying the indices reach new highs on this move off the December lows. Not saying that is an impossibility, but the huge 2018 topping pattern still holds sway.

That topping pattern suggests no new highs and indeed at least a drop back to the December low. But that is after this current move ends. There can very well be a third leg higher, the leg NASDAQ and its leaders are attempting to initiate right now. Some stocks such as CRM, TEAM and DATA may indeed hit new highs regardless of the indices -- they held up that well during the selling. Most would not, but again, that does not preclude a third leg upside, something AMZN, FB, GOOG, CRM, AVGO and others are suggesting started Tuesday.

Does that change anything. Not really. The watch is still whether NASDAQ can hold the move and whether the NYSE indices follow for a third leg. We liked AMZN, GOOG, FB and company enough to initiate buys. Whether they hit new highs or not is irrelevant -- nice, but irrelevant. We are making plays based upon their patterns and their action. If that leads others higher, we make plays on them. Then it is a matter of seeing how far they go, riding them higher, taking logical gain along the way as on leg 2. If they fail and roll over, then that also tells the story of a failed third leg attempt and likely at least a test of the December low.

See? Plenty of middle ground, and we make a LOT of money playing the middle ground do we not?

The key Wednesday is that NASDAQ leaders breaking higher hold the moves, add to moves, and drag other similar stocks higher with them. The upside does not want to see NASDAQ immediately repudiate the move with some kind of reversal, either a surge that reverses hard or just a selloff from where it closed Tuesday. AMZN, GOOG, CRM and others made a good break higher Tuesday, starting the next move. Again, that move needs to hold, and more than that, needs to put more mileage higher.


There was news indeed, some important, some just noise (okay, most just noise).

Empire State PMI (New York), Jan: 3.9 versus 12.2 expected versus 11.5 December

Yet another regional PMI takes a tumble. These are not based on hard data but are sentiment surveys. Nonetheless, they provide real time data regarding orders and perceptions in business.

PPI, December: -0.2% versus -0.1% expected versus 0.1% November.
Year/year: +2.5%

Core: -0.1 vs 0.2 expected versus 0.3% November
Year/year: +2.7%

Final demand: -0.2%

Apparently, the Fed is fine with 2.7% core inflation as it maintains its 'pause' position: The purportedly most hawkish George today said it might be a good idea to pause in hikes and balance sheet reduction for now because the previous rate hikes 'have not kicked in yet.' Well, yes, given the rapid slowing in more leading economic data, and the subsequent government shutdown said to slow the economy even more. After all, Jamie Dimon today said that if the shutdown lasted a quarter, GDP could fall to 0%.

Is that not a sad situation that the federal government is so that large that shutting it down for just 3 months could reduce GDP growth to 0%? Never in their wildest nightmares did the people in Philadelphia believe that the government would be so large as to so dramatically impact the entire country's economy in such a way. Indeed, I would posit that is the exact opposite of what they wanted. I would argue that the economy should THRIVE when the government is not infiltrating and regulating every aspect of process or manufacturing in a company.

But, I digress.

What I said would happen is happening: the economy is slowing on the supply side and inflation is at absurd levels. Absurd you say? Yes. Why is a yearly 2.7% price increase a good or necessary thing? Why do we accept the reduction of our buying power every year as if it has to be? The Fed slowed the economy, hurting the dollar, and as economic history tells you, inflation is the result. The Fed likes that but we don't. Why do we have a Fed again?


Stats: +155.75 points (+0.65%) to close at 24065.59

Stats: +117.92 points (+1.71%) to close at 7023.83
Volume: 2.05B (+5.67%)

Up Volume: 1.44B (+840.44M)
Down Volume: 559.78M (-760.22M)

A/D and Hi/Lo: Advancers led 2.14 to 1
Previous Session: Decliners led 2.18 to 1

New Highs: 26 (+4)
New Lows: 19 (-2)

Stats: +27.69 points (+1.07%) to close at 2610.30
NYSE Volume: 868.088M (-2.25%)

Up Volume: 531.603M (+157.876M)
Down Volume: 329.683M (-168.072M)

A/D and Hi/Lo: Advancers led 1.77 to 1
Previous Session: Decliners led 1.7 to 1

New Highs: 13 (-1)
New Lows: 12 (-10)


VIX: 18.60; -0.47
VXN: 23.66; -2.08
VXO: 18.16; -1.45

Put/Call Ratio (CBOE): 1.03; -0.01

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: 2.718% versus 2.706%. TLT broke lower through the 20 day EMA, continuing the pullback off the high from early January. 120 is support (closed at 120.04). If that gives, bonds are not suggesting trouble just ahead.

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

EUR/USD: 1.14802 versus 1.14734

Historical: 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: 108.551 versus 108.340

Historical: Last below 109 in June 2018: 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: 52.11, +1.60.

Gold: 1288.40, -2.90. Pressing against the upper trendline of the triangle in its second week of consolidation.

End part 1 of 3
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