Wednesday, February 13, 2019

The Daily, Part 1, 2-13-19

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2/13/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: CRM; TECD
Entry alerts: AAPL; GOOG; LASR; SMTC
Trailing stops: None issued
Stop alerts: None issued

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- Upside bias continues but indices suffer two intraday pullbacks, the last upsetting another afternoon comeback.
- The late recovery-dumping selloff leaves a session de mediocre.
- Moving closer toward resistance, still room to run, overall daily moves may turn a bit smaller.
- Stocks may open lower as the inevitable occurred: Trump backtracked on border deal, looking for 'land mines' as some in GOP object to certain language and the short timeframe to review.
- New economic data is not that promising.

It was not much of an upside move, but it was upside. Still, the close was a shadow of the early gains and the afternoon gains. Two sharp intraday drops neutralized much of the upside. The first at Europe's close (11:00ET), the second with a half hour left after a solid recovery from the earlier drop. That kept the indices moving higher in this next leg, the leg to the 'last' resistance, but it was not one that makes the bulls more bullish and the bears less bearish. Or at least perhaps a bit. The very late selloff defeated a solid afternoon recovery, altering the recent trend of rallying in the afternoon, and holding the rally into the close.

SP500 8.30, 0.30%
NASDAQ 5.76, 0.08%
DJ30 117.51, 0.46%
SP400 0.48%
RUTX 0.31%
SOX 0.30%
NASDAQ 100 0.02%

Still, the action remains solid overall as the indices push higher toward that next resistance.

Then the afterhours action. Some in the GOP started to grumble over some language in the budget/border deal with some who were involved in the compromise wanting more time to review it and delay the Thursday night proposed vote. One GOP leader in the compromise says the deal is 'leaking oil' and perhaps 'needs more time to sit.'

That was not good, but then the President finally weighed back in. After initially indicating he would favor it and go ahead with emergency funding on his own (and as Senator Cruz said, why not use some of the billions in drug money seized to pay for the wall -- using the money from the areas the wall is to prevent), the President backed off, stating he was looking for 'land mines' in the bill.

Futures did not love these developments. They did not crater, but on the news they definitely sold off.


Still moving higher but as the indices near the important resistance at the top of the Oct/Dec range they will encounter resistance, feeling the presence of those important peaks in the range. Thus, while there are good moves in the indices, others are sluggish. Expect that kind of action as they work their way higher toward that resistance.

DJ30 and the midcaps led. Go figure. The Dow moved past the early February high, crossing 25,500, moving closer to that 26K - 26,250 - 26,350ish top end of the October/December range. Gapped, rallied, then dropped 80 points from the high by the close. Not terrible, simply moving higher on this renewed move though without a lot of power.

NASDAQ touched the 200 day SMA intraday and then faded to basically flat, closing below the opening print. It is just below the early December, session before the drop, peak. NASDAQ is at the start of the range. There is room up to the October mid-month recovery peak that started the range (7670; closed at 7420), but the moves will likely be more muted on a day to day basis as NASDAQ bucks that resistance.

SP400 worked just fine, adding a third straight upside gap and rally. Held most of its gain as it bumps right into the early December peak hit just before the lurch lower. SP400 is close to the range of resistance at 1905 to 1920, now just 12 points away from the lower reaches. That range includes the highs from the Oct/Dec trading range and the 200 day SMA. The midcaps were playing catchup to the other indices, and they are there.

RUTX is being left by the midcaps. Up quite decently the past three sessions but still well below the 200 day SMA and the top of the Oct/Dec range. It is very close (10 points) from the early December peak hit the day before the bombs started dropping lower. Sure it can rally farther, but it is starting to brush the range peaks even if it is 45 points from the 200 day MA.

SP500 gapped higher above the 200 day SMA (just cracked it Friday) but faded half its intraday gain. Held the 200 day, but showing a doji in an unimpressive session. 2800 to 2815 is still the top of the range (closed at 2753). It thus has more room to work higher.

SOX gapped upside again, rallied to a higher recovery high -- then faded to a modest gain and a tombstone hammer doji. Perhaps just a continuation doji right in the middle of the June to early October range. Has more room to run to the top of that range, NVDA earnings are dead ahead and NVDA can provide a catalyst in its inverted head and shoulders formed off the mid-November gap lower.


Some very interesting strength shown in new areas.

Homebuilders: Strong upside then blah Wednesday. Still good patterns from DHI (nice test!), TOL, PHM.

Building materials: TREX pausing after a good run; okay, we already banked some good gain. LPX gapped up through the 200 day SMA on big volume. CX (concrete) looks poor. WIRE (wire) looks pretty good if you are into that.

Industrial/Manufacturing: MMM continues to surge. Others, meh. EMR, CMI added some more upside to good moves, CAT gapped higher, faded most of the move.

Software: All over the place in the kind of moves delivered Wednesday. Good upside moves Friday to Tuesday, then off some today. Good move, higher highs, taking a breather. Makes sense. COUP, TEAM, CRM, NOW all gave back some ground even after good initial moves. HUBS gapped sharply higher, faded the move. VMW continued a solid rally to the December peak. ADBE gapped upside, faded to a loss.

Food/eateries: Stalled some this week, drifting higher for some, others giving some back. KO still drifting upside. PEP broke higher Tuesday, modest gains Wednesday. CMG recovered some from the Tuesday modest drop. WING flailed around and landed on the 20 day EMA.

Retail: NKE added another 0.8%. LULU gave back some of the Tuesday breakout move. WMT breaking higher; interesting. TGT showing some volume as it comes off a consolidation. Signs of life but not begging for entries.

Chips: NVDA is heading to earnings with an inverted head and shoulders after a gap lower in October. MRVL testing a move over the 200 day SMA. AVGO continues to chug higher. CY doji'ed after a good break higher Tuesday; held off. Entered SMTC on a good break higher. Many moved up, faded from the high: TXN, INTC, RMBS. Still a solid group, looking for the next catalyst. NVDA?


Stats: +117.51 points (+0.46%) to close at 25543.27

Stats: +5.76 points (+0.08%) to close at 7420.38
Volume: 2.1B (-1.41%)

Up Volume: 1.25B (-310M)
Down Volume: 798.8M (+254.12M)

A/D and Hi/Lo: Advancers led 1.42 to 1
Previous Session: Advancers led 2.82 to 1

New Highs: 74 (-3)
New Lows: 21 (+8)

Stats: +8.30 points (+0.30%) to close at 2753.03
NYSE Volume: 813.843M (-6.49%)

Up Volume: 506.342M (-164.125M)
Down Volume: 297.294M (+111.087M)

A/D and Hi/Lo: Advancers led 1.84 to 1
Previous Session: Advancers led 3.02 to 1

New Highs: 87 (-7)
New Lows: 5 (-3)


VIX: 15.65; +0.22
VXN: 19.00; +0.31
VXO: 15.91; +0.26

Put/Call Ratio (CBOE): 1.01; +0.23

Bulls and Bears:

Bulls continue to recover, bears hold steady, both after really large moves during the late 2018 selling.

Bulls: 48.6 versus 45.8

Bears: 20.6 versus 20.6

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: 48.6 versus 45.8
45.8 versus 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 20.6
20.6 versus 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: 2.706% versus 2.686%. Still in the 6 week consolidation of the surge from the November low to early January.

Historical: the last sub-2% rate was in November 2016 (1.867%). Last trade over 3% was November 2018.

2.686% versus 2.672% versus 2.634% versus 2.657% versus 2.695% versus 2.702% versus 2.725% versus 2.684% versus 2.64% versus 2.679% versus 2.710.5 versus

EUR/USD: 1.12616 versus 1.13323. A dive lower Monday, a sharp recovery Tuesday, then a massive dive lower Wednesday. Looks as if heading lower toward 1.12.

Historical: 1.3323 versus 1.12816 versus 1.13218 versus 1.13396 versus 1.13645 versus 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: 110.945 versus 110.523. Rallying toward the 200 day SMA after clearing the 50 day Monday.

Historical: Last below 109 in June 2018 then tumbled to 107 in early January 2019. 114.51 is the recent high from October 2018.

110.523 versus 110.488 versus 109.754 versus 109.793 versus 109.803 versus 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

Oil: 53.90, +0.80. Still working laterally along the 50 day EMA, now for 6 weeks. Still something of an inverted head and shoulders pattern, suggesting more upside ahead.

Gold: 1315.10, +1.10. Still testing over the 10 day EMA after the break higher.


Xi is said to be meeting with Mnuchin and Lighthizer on Friday, something that was not originally planned. Market likes that as it shows the meeting is that important.

The budget compromise looked decent but now is on shaky ground. Avoiding a shutdown even if it means a court fight was okay with the market. As for the now deal in peril itself, while some republicans in Congress say the democrats caved, that only shows why the GOP in Congress are such bad negotiators. Bigger picture, the democrats cut a better deal than before: they originally offered $1.6B before pulling it completely. Also, the number of 'beds' for criminal illegal aliens is capped at a lowish number -- if more criminals than that, oh well, they get released to become model citizens I am sure. Caved. Good grief.

In any event, while the market was sanguine with the passage, now that is an uncertainty. Trade is also still undecided and is the key factor. A deal that ceases hostilities will be greatly applauded by the market. For now, the news is hopeful, but that is no real change: it has been hopeful before only to be tweeted away.

I still have a deep belief that China is convinced it can simply offer to buy more of our 'stuff' and that will satisfy the US negotiators. It won't, and that is why I am not too hopeful a major deal can be reached. Trump seems happy with his fictional world where tariffs on incoming goods go into the Treasury; no, we the buyers have to pay a higher price as the tariff is an add-on cost, so all prices go higher. Imported inflation. I will say, after working with some curtain rods made in China I will attempt to avoid buying those kind of goods from there. Why? Cheap garbage. But, I digress.

If no deal, more tariffs. Trump said he may extend the March 1 date, but if he feels there is no progress he won't hesitate to pull the tariff increase trigger.

There are also new economic developments today. We learned that there are a record number of people behind on their car payments. Even more ominous, tax receipts on an annualized basis turned negative. Since 1970, each time this has occurred the US was in recession or ready to enter recession. That is reassuring. For who I don't know.

Okay, so what then Thursday? The move has continued despite these same stories. They come and go. When they come, the market stumbles, then it recovers.

The current market is still working higher toward the top of the range. More stocks are trying to join in, e.g. homebuilders, some manufacturing, hotels are breaking higher. The more upside the merrier the rally. They may take a hit Thursday. If so, we will watch for tests, and when they hold and bounce, that will provide a good entry opportunity. Some will continue higher regardless; those are opportunities as well.

We will continue looking for upside plays but knowing that the indices are going to start feeling resistance and the moves could slow. That is the probability. A pullback to support that holds improves the probabilities a bit. There are still good setups out there than can run well in short periods and if they are there and can make us money in short order. For now, we continue playing good upside moves.

Have a great evening!

End part 1
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