Monday, January 07, 2019

The Daily, Part 1 of 3, 1-7-19

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1/7/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: TEAM
Entry alerts: CRM; MITK; NFLX; SPLK
Trailing stops: None issued
Stop alerts: FFIV; LULU; QID

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- Second rally leg continues as stocks rally off a flat open.
- Same stocks moving before continue moving Monday. Some chips trying to join in.
- Still playing the upside on the further follow through, taking some gain, but still aware of a potential next top to this leg.
- More are joining the 'bottom is in' chorus. Still playing upside but time to be a bit wary as a lot of fear quickly turns to a lot of hope.

After the Friday surge stock futures were flattish but edged higher into the open. Stocks rallied into early afternoon, not really showing a lot of hangover from Friday. The President announced he would give an 'emergency' address to the nation this evening regarding the shutdown and immigration, and when he did the market rise on the session halted. Didn't tank or give up gains, just stopped and stocks slid laterally to the close.

SP500 17.75, 0.70%
NASDAQ 84.61, 1.26%
DJ30 98.19, 0.42%
SP400 1.10%
RUTX 1.78%
SOX 1.95%
NASDAQ 100 1.02%

VOLUME: NYSE -8%, NASDAQ -3%. Again lower volume on NASDAQ and DJ30 while NYSE volume faded as well after a solid Friday move.


The 2 hour lateral trade did not hamper the continuation of the rally. NFLX continued upside after gapping over the 50 day EMA Friday. SPLK continued the Friday move as did AMZN. TEAM came back to life with a breakout move and we banked some of the January options for a nice gain.

Small caps again led the move higher (though Friday they had to bow to big tech) as they make up the massive ground lost to the large caps during the selloff. Many stocks continued higher off the Friday upside -- a lot of the same groups that rose Friday. At the same time a lot groups that have done nothing continued doing nothing, e.g. transports, big pharma. Chips posted some good moves in good names, e.g. AMD. Some more stocks trying to come up and lead is never a bad thing.

Thus, the relief move off the December selloff low continued the renewed bounce from Friday, a second leg upside. Friday was a follow through to the initial move, coming on the seventh day of the overall move, a good follow through according to IBD. It will need leaders to move to significant higher highs, and as noted, there are some more stocks looking better or at least trying to come around. Some of the chips have spent a long time lower and are finally trying to come back upside. Software continues to look strong.

So, new highs? Likely not. We are playing the rally and will continue doing so, but mindful that it is likely, despite the big move Friday, still just a bounce from the lows.

On the day we banked some gain on TEAM as it broke higher, bought some NFLX, SPLK, CRM and MITK as they posted good moves. There were some solid moves on solid volume. For now we are picking them up as the initial rally is confirmed, but we do so understanding this move likely peaks long before new highs are hit.

There is still a lot of event news coming this week. Powell and eight other Fed speakers are up for scrutiny. Durable goods, updates on the Chinese trade negotiations, and of course, earnings are getting closer. It could very well be a situation where stocks rally into earnings then the market reevaluates the rally.



From a flattish open to a decent continuation of the Friday rally follow through. A good showing of bids returning even after a huge Friday move. A bit flat at the open then bids returned.

SP500: Moved up through the 20 day EMA with a good push following the Friday move. Volume backed off but it was strong on the initial move of the second leg so no issues there. Over the 20 day, still room to 2600 and the 50 day SMA near 2650 (closed at 2550).

DJ30: DJ30 moved through the 20 day EMA but could not hold it. Faded to a doji to end the session. Not the strongest signal, but likely a continuation doji, i.e. leads to further gains on this second leg.

NASDAQ: Similar to SP500, NASDAQ continued higher, moving through the 20 day EMA and on toward the 50 day MA at 7,000 (closed at 6823). NASDAQ still trending lower but making a higher relief bounce off a sharper downside leg.

SP400: Midcaps showed the same action, a rally through the 20 day EMA on the close. The step higher continues in the recovery. Still have to watch for a formation of the ABCD downside after this leg runs out of gas, but there is still room toward 1750 - 55.

RUTX: Market leader yet again as RUTX continues to play catch up from its sharper losses, trying to catch back up to the large cap indices. Through the 20 day EMA with a nice move. Have to watch around 1440 as resistance (closed at 1405).

SOX: A solid move upside to close just past the early January closing high. Not bad as it is back over the early January high, but the 50 day MA's are just overhead. Lots of resistance as it recovers to the 50 day MA where it failed early December. Many chip patterns are looking much better, however, and perhaps can provide leadership through that resistance.


Software: Some very solid moves from stocks such as SPLK, TEAM, CRM. TTWO looks ready to break higher and COUP looks as if it can make a move.

FAANG: NFLX continues its strong move, up almost 6%. AMZN jumped through the 50 day MA. GOOG was disappointing as it could not surge more, but it did hold its move through the 50 day MA from Friday. AAPL, FB barely moved.

Chips: AMD making a good break higher and NVDA looks as if it wants to move higher as well. XLNX posted a strong move. Those relating to AAPL are still in the toilet, e.g. SWKS.

Retail: Some impressive moves from less than impressive patterns, e.g. ROST, TJX, TGT.

Drugs: Big names less than impressive, e.g. PFE, MRK. LLY not bad. Some smaller biotech worked, e.g. ARRY, EXAS -- strong moves as money moved in.

Transports: Not much improvement. DAL barely moved. Trucks still not moving, e.g. JBHT, ODFL. UNP (rails) jumped afterhours on a new leader; the others did not.

Financial: Slower session for all banks and financials from JPM to GS. Interestingly, MS, Fidelity, Citadel are trying to set up a low-cost exchange.


Stats: +98.19 points (+0.42%) to close at 23531.35

Stats: +84.61 points (+1.26%) to close at 6823.47
Volume: 2.52B (-2.7%)

Up Volume: 1.98B (-350M)
Down Volume: 507.15M (+267.99M)

A/D and Hi/Lo: Advancers led 3.05 to 1
Previous Session: Advancers led 6.23 to 1

New Highs: 29 (+19)
New Lows: 19 (-16)

Stats: +17.75 points (+0.70%) to close at 2549.69
NYSE Volume: 1.013B (-7.80%)

Up Volume: 794.852M (-255.749M)
Down Volume: 212.107M (+168.622M)

A/D and Hi/Lo: Advancers led 3.65 to 1
Previous Session: Advancers led 9.9 to 1

New Highs: 8 (+2)
New Lows: 11 (0)


VIX: 21.40; +0.02
VXN: 28.53; -0.04
VXO: 23.08; -1.30

Put/Call Ratio (CBOE): 0.87; -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: 2.694% versus 2.668%. Bonds faded a second session, but still holding over the 10 day EMA after a very strong break higher.

Historical: the last sub-2% rate was in November 2016 (1.867%). 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% versus 3.127% versus 3.147% versus 3.186% versus 3.239% versus 3.228% versus 3.222% versus 3.201% versus 3.22% versus 3.146%

EUR/USD: 1.14834 versus 1.13980. Euro breaking higher off the 50 day EMA.

Historical: 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 versus 1.13604 versus 1.1376 versus 1.13244 versus 1.13657 versus 1.1404 versus 1.1376 versus 1.13970 versus 1.13360 versus 1.13199 versus 1.13934 versus 1.13682 versus 1.12973 versus 1.13325 versus 1.13380 versus 1.13829 versus 1.13818 versus 1.14484

USD/JPY: 108.705 versus 108.517. Dollar added a bit more upside after that 3 week drop. Still moving back up but slow.

Historical: Last below 109 in June 2018: 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 versus 113.634 versus 113.634 versus 113.385 versus 113.022 versus 112.66 versus 112.71 versus 112.813 versus 113.581 versus 113.474 versus 113.402 versus 113.559 versus 113.781 versus 113.510 versus 112.972 versus 113.007 versus 113.077 versus 112.617 versus 112.831 versus 113.585 versus 113.576.

Oil: 48.52, +0.56. Rallied up to near 50, resistance, then faded to a much more modest gain. Not much of a rebound thus far, and 50 is some serious resistance.

Gold: 1289.90, +4.10. Modest gain after gold bumped the upper trendline in its triangle and faded Friday. Likely tests more if the stock market continues rising.


Small business sentiment and JOLTS are out Tuesday along with the odd Fed speaker -- and they are odd, at least in their economics.

As noted, we are viewing this as a bounce still with a low probability of nearing new index highs on this leg. Sure some are saying the Fed changed the game as noted over the weekend and as Dennis Gartman says today after last week saying unequivocally the market is in a bear market and more selling is coming. With the Friday move his position has moved.

Wow, more calls for a new bull market. Could be, but I again refer to the yearlong topping pattern and relatively modest decline. Sure the market can move up and is moving up in an oversold bounce. We are playing it and taking gain on positions even as we buy some new ones. That said, while there is an upside follow through there is a ton of work to be done to transform this into new highs.

Thus, we play the move, view all of this 'market bottom' talk with healthy skepticism, and really like other people driving our positions higher. If anything, if there is a bottom setting up, it likely does so after a test of the prior selloff low. In that case good stocks will have plenty of time to form up better patterns. If that is the case, so be it. In the interim, Gartman has a recent history the past few years of being on the wrong side, and playing the other side worked. After this second leg higher off the low and the potential D points in an ABCD downside pattern it would be good to keep the downside in mind. Whatever, we will take what the market gives us.

Have a great evening!

End part 1
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