Wednesday, February 06, 2019

The Daily, CORRECTED Part 1 of 3, 2-6-19

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2/6/2019 Investment House Daily
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Targets hit: COUP; GOOG
Entry alerts: DRI; OSTK; ROKU
Trailing stops: CGC
Stop alerts: CGC

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- The stock market takes a pause. Except for chips, the new leaders.
- Recent leaders a bit winded but food stepping up, chips keep stepping.
- Some things, such as Yellen, never change.
- Most indices are at or near resistance after good runs. Anticipating a test over the next week, a test that has already started for some leaders.

An overall quiet news session, an overall quiet market as stocks for the most part paused, leaving the indices basically flat. Except SOX. Surging another 2.59% as it blew through the 200 day SMA, the chips are showing they are once again upside leaders. And where the chips go, the market typically follows.

SP500 -6.09, -0.22%
NASDAQ -26.80, -0.36%
DJ30 -21.22, -0.08%
SP400 -0.15%
RUTX -0.15%
SOX 2.59%
NASDAQ 100 -0.37%

VOLUME: NYSE -6%, NASDAQ -4%. No higher volume churn as the indices trade flat after a nice move. That is good: higher volume indicates a lot of sellers as stocks try to push higher.

ADVANCE/DECLINE: NYSE -1.5:1, NASDAQ -1.1:1. Tame.

Indeed, the indices have rallied the past several weeks along with SOX. The chips, however, in most cases remained laggards, still deep in the downtrends, well off anything resembling a high. Not all for sure; XLNX, AVGO and a few others have powered higher from quite some time back. More and more are making moves to join those stocks, and that bodes well for the market overall.

But of course, other stocks are up as well. Yes, and they look as if they need to take a breather after their moves. That is the perfect entr e for chips to demonstrate some more leadership and push higher.

Thus, while the rest of the market appears primed for a test and rest period (e.g. software, FAANG, BA), the chip move is looking to broaden out. Indeed, Wednesday saw the until extremely recently beleaguered AAPL suppliers post solid gains as SWKS jumped higher on earnings.

If the financials -- rather well set up -- decide to rally, and the food stocks continue setting up and moving up (CMG exploding upside afterhours on earnings), the market has a pretty good swath of leadership coming up to help it push, yes, higher.

Leadership is necessary, but is it sufficient to move the indices higher?

I always harp on a market move needing leadership. Stocks can bounce from selloffs, but if it is just a general bounce with no good patterns and stocks mostly in ruins, then the move fails.

As a bounce continues, if it can survive the first test or two, then that gives patterns a chance to build. Those patterns produce leaders that give the move broader strength and keep the move alive.

That is what has happened with this rally. One leg, two legs, a third that was bashful but then took off. Software, FAANG, industrials such as BA -- some good groups to continue the move, though frankly, most of the heavy lifting is from a relatively small group prominently including software stocks.

That said, now the indices approach a critical juncture, the top of the October/December range. That looks to be the level that will provide resistance to the third leg. It is important, just below the October highs. After a long run from the December low the test of that level will tell the tale of the rebound: new highs or a deeper test, a test some with some good credentials are saying could take it back to the December lows. I am not smart enough to know that, but I do know that if the latter is the case, some name stocks will break key support or key trends, revealing the move.

We continue taking nice gain on the move higher. We also are picking up positions in stocks that are not extended, that can provide additional market lift while the leaders that really surged test back from this third leg and the overhead resistance. They will be important in themselves: if their breaks higher from good setups, good patterns reverse and fail, that also tells a big part of the story: sellers are rejecting the next round of breakouts. That frequently portends a more significant selling episode. Gee, that sure sounds clinical.

Wednesday, as noted, saw some great chip moves along with some other non-extended areas, while those recent leaders pause the move. Rotation is a healthy indication. Again, however, the tell is in how these new breaks higher perform.


Futures started lower but moved up right into the open. Still not positive for most stocks, but it was not bad action. Indeed, many stocks sold off in the morning session but did recover quite well in most cases.

Perhaps it was Janet Yellen in an interview being Yellen: she opined the next Fed move might be a rate cut . . . IF the global growth continues its decline. Yellen the perma-cutter, but at least that provides the market more comfort -- as if it is lacking that after the Powell Fed's quick about face.


SOX: Gapped and rallied into the middle of the June to early October trading range. Powerful move as some important yet dormant chips jumped higher.

SP500: faded modestly after bumping at the 200 day SMA Tuesday. As noted that session, this is a key level for SP500, just below the tops of the October/December range and a likely place for the third leg to take a breather, or take something more.

NASDAQ: Similar action, approaching the 200 day SMA Tuesday then fading modestly Wednesday. NASDAQ's 200 day is in close proximity to the tops of the October/December range, so NASDAQ has some pretty stiff resistance it is facing.

DJ30: over the 200 day SMA for almost a week, the move slowing just a bit below the tops of the range. A good 600 to 850 points to the top of that range; perhaps the pause is just a one-day event as the Dow continues higher toward the top of the range. The point: it is in the range of resistance on this run and the risk/reward is not as positive.

SP400: within 50 points of the top of the range and the 200 day SMA as of Tuesday, paused with a doji Wednesday. Perhaps just a continuation doji as it was Friday, but after this kind of run you need to be cognizant of the resistance and the daily action. So far no issues in a nice move higher, other than it has gone on for quite some time.

RUTX: Second straight doji at the 78% Fibonacci retracement of the December selloff, right in the middle of the October/December trading range. Pausing after a decent break higher, still lagging.


Semiconductors: Strong moves by SWKS, SLAB, MU, AMAT, MCHP -- these and many others posted nice gains.

Software: After strong runs these stocks are a bit winded. As they tested intraday, some buyers rushed in to buy them. Good to see they are still there, but after some of these moves upside those buyers are likely fighting a tough fight as these stocks are overbought and likely looking for a test: NOW, CRM, HUBS, COUP. That said, they look quite solid in the start of the test and cold provide some intriguing patterns if the pullback remains orderly (COUP, AMD, NEWR and more). ADBE is one setting up very well.

Food: CMG is up over 50 points on its afterhours results. DRI posted a solid advance. PEP, KO, with a little more testing, could produce some really good upside breaks. I know; boring as hell, but they made us money in October and November and are now almost finished with new bases.

FAANG: FB, AAPL, recent leaders, took a pause. NFLX took a breather similar to FB, AAPL, stalling some at the mid-January high. AMZN continued to hold near the 50 day MA. GOOG reversed sharply off its strong earnings move; we banked the rest of the option gain.

POT: Taking a break after big runs. CRON at the 10 day EMA, CGC sold down to the 20 day EMA but did end showing a doji.


Stats: -21.22 points (-0.08%) to close at 25390.30

Stats: -26.80 points (-0.36%) to close at 7375.28
Volume: 2.17B (-4.41%)

Up Volume: 1.02B (-280M)
Down Volume: 1.08B (+147.55M)

A/D and Hi/Lo: Decliners led 1.09 to 1
Previous Session: Advancers led 1.31 to 1

New Highs: 50 (-25)
New Lows: 18 (0)

Stats: -6.09 points (-0.22%) to close at 2731.61
NYSE Volume: 791.501M (-5.67%)

Up Volume: 270.828M (-241.688M)
Down Volume: 506.866M (+195.586M)

A/D and Hi/Lo: Decliners led 1.5 to 1
Previous Session: Advancers led 1.71 to 1

New Highs: 61 (-33)
New Lows: 9 (+5)


VIX: 15.38; -0.19
VXN: 19.74; +0.27
VXO: 15.28; -0.02

Put/Call Ratio (CBOE): 0.97; +0.14

Bulls and Bears:

Bulls rebounded farther but the move has slowed after that crash into the thirties during the December selloff. Bears are fading but bulls and bears crossed and did their 'thing' in terms of a contrary signal.

Bulls: 45.8 versus 45.4

Bears: 20.6 versus 21.3

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: 45.8 versus 45.4
45.4 versus 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: 20.6 versus 21.3
21.3 versus 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: 2.695% versus 2.702%. Bonds still holding a bid overall as TLT climbs off the sharp drop into Monday, keeping the uptrend alive.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.702% versus 2.725% versus 2.684% versus 2.64% versus 2.679% versus 2.710.5 versus 2.738% versus 2.748% versus 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: 1.13645 versus 1.1396. After bumping the 200 day SMA 7 sessions back, EUR has rolled over.

Historical: 1.1396 versus 1.14350 versus 1.14554 versus 1.14478 versus 1.14924 versus 1.14351 versus 1.14285 versus 1.1407 versus 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: 109.803 versus 109.997. A third doji below the 50 day MA as the slow 6 week rebound continues -- slowly.

Historical: Last below 109 in June 2018: 109.777 versus 109.987 versus 109.53 versus 108.85 versus 108.96 versus 109.364 versus 109.180 versus 109.545 versus 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: 54.01, +0.35. Nice 1-2-3 test to the 50 day MA, showing a doji. Broke over support, rallied a bit, testing back, and setting up a new break higher.

Gold: 1314.40, -4.80. Four session fade now, holding just over the 10 day EMA on the close. Still a good test form a very solid end of January rally.


Earnings continue, with CMG surging afterhours, MTCH as well. It appears people are making quite a few hookups as the Kinder part of the company enjoyed the most potent gains, thrusting the stock toward 60 afterhours. Even stocks such as DIS, gapping upside but then giving it up to close at the 50 day EMA, likely enjoy upside: the MO has been beat big, reward big, or beat decently with solid results, fade, then get bought.

Earnings remain the big news though trade was discussed today -- Mnuchin leaving for China for more talks. I grow weary of hearing anchors say 'but what if China doesn't go for IP changes (read 'lions, tigers and bears, oh my!')? Well, the US simply cannot afford to give away our tech that we spend hundreds of billions to create through China's mislabeled 'joint ventures' and 'partnerships.' Nor can we tolerate China's bald-faced, wanton theft of our IP through hacking and failure to honor contracts. Read about what Huawei has done in stealing the IP behind US product, the bugging of devices it sells to US companies, etc. It is out and out theft and that company should be shut down. Just my opinion . . .

So, trade is still out there, but 'progress' is being made, so for now all is well. That means the market is ignoring it for now. The Fed is on indefinite holiday and that is the main external factor the market cares about. PLUS -- all the talk about how the US economy would feel the pain as much as China was and is flat out a basic attempt to spread fear to avoid change. Change MUST occur. Just as NAFTA is a crappy deal that has hammered small US business and the new deal should be passed. Yet, some idiot GOP congressmen are not going to go with the new deal. One particularly trade-stupid gentleman (Toomey) Tuesday said NAFTA has done pretty well for us. No it hasn't. Look at the jobs figures before and after. Oh, he is a Congressman; I forgot. He is surely receiving kickbacks or other preferential treatment from the big companies that are exploiting NAFTA and making all the money from it. Silly me.

But, I digress. The chips are moving higher. Other areas are setup to try their hand, e.g. food, financials, even china stocks. At the same time the other indices are at or close to key resistance. Something is going to give, and as the market has run well, before too much more upside is in place, some of the leadership groups will test. Some already are in a second or third or fourth day, though not the biggest leaders.

Therefore we anticipate some type of test over the next week to get underway. We have taken gain and will continue to do so, particularly on nearer term options, if the upside move continues to bump resistance and not make further headway.

Have a great evening!

End part 1
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