Saturday, January 26, 2019

The Daily, Part 1 of 3, 1-26-19

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1/26/2019 Investment House Daily
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Targets hit: COUP
Entry alerts: JD
Trailing stops: None issued
Stop alerts: None issued

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- Trade on again, shutdown is shutdown, NYSE indices break higher from the test.
- SOX continues higher, taking the lead in the third leg.
- Stocks rise in the face of less than great news, lead by an important, often market-leading group.
- A new bounce for the third leg on Friday, but of course in a recovery there is little margin for error.

Fridays, Walls, balls, shutdowns that really are not, re-openings, and of course, markets.

Drama, drama, drama. Futures were higher Friday as some of the drama remained, some lifted. Trade news was upbeat as the meeting between Chinese and US trade people that never existed but was cancelled Tuesday was said to be back on. A preliminary protocol-type meeting for the end of January meeting -- but are we not at the end of January now? Ah, such is the state of what is considered news today.

The shutdown over the border wall -- among other things -- still continued as of Friday morning. Who would blink first? The reporting of carnage continued, though the metrics show that even with a government shutdown, government spending was down by just 7% per day. Even with the shutdown still ongoing, stocks were ready to try a rally.

Late day, word came that a deal was struck, a 3-week reopening of the government, no money for a border wall. It is hoped the respite will allow the sides to agree. Hmmm. Both sides are entrenched, at least the ones calling the shots. Several GOP senators pleaded to reopen the government -- had to get their spending fixes I suppose -- and that put pressure on the GOP. Many democrats were doing the same. Their voices were loud enough for a truce, but of course both sides have spent the ensuing 24 hours claiming victory. A 3-week window of funding is victory for anyone? Questionable.

GOP pundits claim the President broke a promise. No wall, no b*lls appeared to be the response from the GOP-ish side. Democratic leaders claim the President blinked. The White House shot back, stating if no deal is reached with border funding, then get ready for some kind of executive action on the wall.

Hardly reported early Friday was the White House drafting a 'national emergency proclamation' including $7B for wall construction. It would appear that if there is no deal with wall funding, something reiterated by top democrats this weekend, there will be some form of executive action. Oh THAT will be well-received.

Stocks respond: huh? What?

Stocks did not seem to mind. INTC missed on revenues, WDC missed earnings and revenues, but stocks moved higher nonetheless. Trade was 'back on' and the markets figure the shutdown gets resolved.

For a second Friday the stock indices rallied. While the prior week saw a bold new move into a third upside leg off the December low, the past week started a short week with a relative sharp decline that set the tone of the week. Was the prior Friday break through resistance a one-day shot that would result in a rebound-ending rollover, or was it just a test ahead of more gains on a third upside leg?

After two sessions' test the growth indices tried a move. NASDAQ edged higher but it was SOX that really moved. Riding earnings from XLNX and LRCX, SOX shot higher. The NYSE indices did not. Their action, as noted at the time, however, was constructive.

Friday SOX shot higher again, NASDAQ gapped upside, and this time the NYSE indices followed.

SP500 22.43, 0.85%
NASDAQ 91.40, 1.29%
DJ30 183.96, 0.75%
SP400 1.07%
RUTX 1.26%
SOX 2.17%
NASDAQ 100 1.27%




After 2 to 3 days down following the prior Friday upside gap, downside that did not look very upside positive after Tuesday, stocks resumed the third bounce. There were clearly leaders, e.g. SOX, while others more or less followed along. SOX is on the run upside while the others are up, but of course face more upside resistance challenges as they resume the climb higher. Nonetheless, the indices are doing exactly what they need to do and they have some leadership from semiconductors, financials coming back, and of course, software.

SOX clearly led upside, surging Thursday to a new recovery high and Friday as well.

NASDAQ was pulled along by SOX' performance, moving Friday to a new closing high on the recovery -- by a slim margin.

DJ30 moved to a new recovery high as well, just eclipsing the prior recovery high a week prior. DJ30 did fall well off the Friday intraday day high to close, taking some of the luster off the move to near the 200 day SMA at 25,000, the next resistance point to take on and overcome.

SP500 gapped and rallied off the 3-day test, moving intraday past the prior week's closing and recovery high. SP500 faded to close just below that prior high. Volume was up but still below average. The move was upside positive but not definitive, a good rebound off a test of the attempt at a new leg. Now it just needs banks to continue and lead the way higher.

SP400 gapped and rallied, closing just over the rebound's recovery high hit the prior Friday. A solid upside break off a classic test of a break through resistance.

RUTX also gapped and rallied, closing just over the prior week's high. As with SP400, a very solid, classic test then break higher.


FAANG: After a weak start, FAANG stocks held support and stated higher Thursday, adding gains Friday. FB still looks as if it wants to end its relatively long downtrend. AAPL actually looks quite similar to FB as it comes off lows. AMZN bounced off the 50 day MA and gapped upside Friday with a decent but uninspired move. NFLX moved up through the 200 day SMA. GOOG gapped up off the 50 day EMA similar to AMZN.

Software: Still a solid group. COUP surged to the initial target. SPLK continued to a higher rally high. DATA surged almost 6% Friday. NOW bounced nicely though is not yet a breakout. EA spent the week working laterally. NTNX, ZS look good but have not made the breaks yet.

Financial: After a week of lateral consolidation, Friday the bank stocks rallied again -- C, BAC. JPM, WFC, not so great. GS started upside, but a light move thus far.

Semiconductors: Another strong move despite INTC, TXN and their weak outlooks. XLNX surged again. LRCX to the 200 day SMA. UCTT surged 11% for us. MU +6.5%, RMBS a good move. Some very solid advances still underway.

Pot: CGC gapped out of a lateral consolidation, rallying 9.66% on huge volume. CRON a strong upside week to a new high.

Drugs: Tough week for the large pharma stocks such as PFE, MRK. LLY held the 50 day EMA with a decent test. Biotechs still look decent: ARRY, EXEL, but nothing overly impressive thus far.

Energy: The big service stocks are trying to make the break higher, e.g. HAL, SLB.

Metals: Gold performs decently, e.g. SA, GG. Industrial metals are so-so, e.g. CENX, AKS, RS.

Machinery/Manufacturing: Some definite improvement though hard to call them leaders just yet. CAT is rallying toward the 200 day SMA in a four month base. CMI is bouncing off a 200 day SMA test following earnings that shot it through that level. TEX, MMM, EMR are off the lows but not much more.


Stats: +183.96 points (+0.75%) to close at 24737.20

Stats: +91.40 points (+1.29%) to close at 7164.86
Volume: 2.44B (+0.83%)

Up Volume: 1.91B (+360M)
Down Volume: 521.8M (-329.33M)

A/D and Hi/Lo: Advancers led 2.57 to 1
Previous Session: Advancers led 1.64 to 1

New Highs: 41 (+12)
New Lows: 21 (-11)

Stats: +22.43 points (+0.85%) to close at 2664.76
NYSE Volume: 860.856M (+9.39%)

Up Volume: 667.665M (+164.109M)
Down Volume: 188.992M (-85.876M)

A/D and Hi/Lo: Advancers led 3.3 to 1
Previous Session: Advancers led 2.08 to 1

New Highs: 50 (+19)
New Lows: 5 (-17)


VIX: 17.42; -1.47
VXN: 21.78; -1.71
VXO: 18.25; -1.13

Put/Call Ratio (CBOE): 0.75; -0.23

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: 2.748% versus 2.734%. Bonds mostly higher on the week though Friday were off. Bouncing off the 2.5 week slide off the early January high.

Historical: the last sub-2% rate was in November 2016 (1.867%). 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: 1.1407 versus 1.13134. After bombing lower Thursday on the ECB white flag, a surge upside Friday to take back the losses.

Historical: 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: 109.545 versus 109.757. A slow, slow creep upside, but nothing more as USD/JPY remains inside the December selloff.

Historical: Last below 109 in June 2018: 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: 53.69, +0.56. Hanging on over the 50 day EMA and 52.50 support in a weeklong lateral move. Trying to make a break higher from a 9 week inverted head and shoulders that formed after a 2 month selloff.

Gold: 1298.10, +18.30. After falling to the 20 day EMA early week, XGLD surged Friday to the upper trendline of the large triangle.


The third leg is underway for sure with SOX, indeed NASDAQ. The other indices are moving up off the test with a very important group, semiconductors, taking the clear point. A very important group for the overall market and thus a good upside signal.

NASDAQ is following -- thanks in large part to its semiconductor components -- while FAANG tries to reset and lead again and software continues its overall solid moves.

The real key for this week is whether the NYSE indices follow. SP400 and RUTX, really growth indices with NASDAQ and SOX, made very good moves Friday. SP500 and DJ30 were not bad, but they need more. Always more, more, more, but that is the nature of the fight when coming out of a sharp selloff.

There are still leaders that can push the third leg higher. NVDA is ready to break upside. AAPL could throw in upside. AMZN and GOOG are still in position to really help, but they have to make some serious moves in their four month bases. Software is solid and not all have broken higher yet, e.g. NOW, NTNX; CRM has consolidated and is at a make or break point. Financials are also there, machinery/manufacturing as well.

Good, but have to perform. Thus far the upside continues to win out on the recovery in spite of the trade, shutdown, world economic, and some earnings have been feast or famine. That shows a resilience in the move and we will thus continue to let positions run and pick up new positions as they show themselves.

Have a great weekend!

End part 1 of 3
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