Monday, February 25, 2019

The Daily, Part 1, 2-25-19

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2/25/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: CRON
Entry alerts: CAT; TEAM
Trailing stops: None issued
Stop alerts: NTNX

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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.


- More positive trade news as tariff deadline extended
- Stocks gap higher, then struggle to hold, losing in many cases more than they closed with.
- Wholesale inventories rise, sales fall and fall for the third month.
- M&A picking up, another indication of a serious stock move already made.
- Indices still have not broken the resistance. Doesn't mean a rollover.
- Still some good groups, but the probabilities are less.

The Monday action was more of the same, more or less. The late Sunday announcement that the March 1 tariff deadline was extended boosted futures across the globe, confirming the prior comments from the US and China that the trade talks were progressing well.

Stocks dutifully gapped upside on the news, rallying higher off the gap into the first 1.5 hours. That was all the move was giving. The indices bumped next resistance on a gap, then they faded. Not a cataclysmic reversal, just could not keep the early excitement going.

The recently leading SP400 and RUTX showed the same action, but they could not hold the gains, closing just modestly negative. The other indices, outside SOX, closed better, but still rather modestly positive.

SP500 3.44, 0.12%
NASDAQ 26.92, 0.36%
DJ30 60.14, 0.23%
SP400 -0.03%
RUTX -0.08%
SOX 0.82%
NASDAQ 100 0.35%

VOLUME: NYSE +12%, NASDAQ -1%. NYSE trade kicked higher to near average, but that may not be such a great thing given SP500 gave up 17 points from the high over 2800. NASDAQ trade faded back to average as it gapped to resistance at the November peak and backtracked 48 points to close. Not all buying for certain, but intraday volume shows more trade early then trade backing off as the session progressed.

ADVANCE/DECLINE: NYSE slightly negative, NASDAQ slightly positive.

Stocks and the indices showed the same action. That seems axiomatic, but not always of course given that some groups often receive money even as the overall market struggles. It was not really a struggle Monday, the action simply did not end as solid as it appeared early on.

Perhaps the trade news is significantly priced into US stocks -- 19% off the selloff lows (measured by SP500) is a significant move, and bumping key resistance without hardly a pause makes it harder to move the needle upside.

Obviously speculation continues about a tipping point, inflection point -- pick your name. IBD tonight asks 'is the market at a tipping point?' You know I have discussed this as the indices moved to and are now moving into the Oct/Dec range (SP400 has moved out of it to the upside). They have not broken through yet, and Monday was solid but again the indices balked at the next level. For sure, thus far bumps at resistance have not stopped the move. Inflection point for sure, and still an open ended outcome.


SP500 rallied to the top of its Oct/Dec range at the November peak and October recovery peak. Gapped higher, rallied higher, touched those levels -- over 2800 for the first time since December -- then reversed most of the move. Started strong, reached up to touch the resistance, then had nothing left, at least on the session. Closed below 2800, still unable to move past that level everyone is watching.

NASDAQ also gapped upside then moved through the November high. As with SP500, could not hold the move. Managed to close higher after taking out the 200 day SMA so it was not a washout session. NASDAQ has hit resistance before, faded, then recovered to hold it. Still in the game, but still has not made the break.

DJ30 gapped over the December peak then rallied to the November peak, the top of its October/December range. Faded but still held the move over the December high. Over 26K, touched next resistance near 26,250. Taking them out one at a time and still has stocks in position to move higher.

SOX also gapped higher, rallied higher, then faded a good portion of the move. Still very solid, touching near the late September peak before fading. Very solid leadership group. Still.

SP400 showed the gap, rally, fade to negative, but still holding the move over resistance.

RUTX rallied to the October range top then dropped to basically flat with a tombstone doji. Last time it did this after a run it came back to test the 10 day EMA and then resumed higher. Normal action, didn't kill it. So far still showing strength.

Summary: The takeaway. Some will say 'failure at resistance.' And for the day, yes it was for most indices. That does not necessarily translate into a rollover and dive lower. As noted with RUTX, it certainly can sell from here but that also does not mean the move higher is necessarily over. The decision is not made on this move. The probabilities suggest a test of some sort. Perhaps RUTX tests the 10 day EMA again and resets for a new move higher. Perhaps the indices test back more toward the Oct/Dec range lows and form right shoulders to inverted head and shoulders patterns. Perhaps they are done and it is fork time, i.e. a deeper drop toward the prior lows.

Again, that is not decided at this point. After a 19% move (measured by SP500) to resistance the probabilities of upside from here are significantly less. The trade deal looks to be factored in for the most part -- just what can the US really expect from China, at least anything verifiable -- earnings are come and gone, the Fed is compliant. The outrider is the economy, and that has been so-so of late.

Oh yes, the economy.

Ah, the economy. Monday the news was not so great. Wholesale inventories for December rose 1.1% versus 0.4% expected and 0.4% November.

Sales, however, fell 1.0%, now down for the third straight month. That tells you inventories are higher because there are fewer goods being sold, the more 'glass half empty' scenario for inventories.

Take out autos from inventories and they drop to -0.8%. Ah, auto sales are super weak, pushing inventories high when sales are low. Looks as if the auto dealers will have to resort, and many already are, to more gimmicks and fancy financing to get inventory out the door.

Retail sales in December were less than expected. Inventory sales are lower. Existing home sales very disappointing.

M&A: more acquisitions are showing up, Monday DHR buying GE's pharma unit, Gold making a hostile for NEM (gold), and Roche buying Spark. Companies always use stock deals to buy when their stock prices are high. That is also a sign that markets have run a long way and often a peak is nearer at hand. Just human -- er, corporate -- nature.


Semiconductors led the market and were still quite solid, e.g. SIMO, SMTC, INTC. Even so, those and more so in others, sold back at least parts of good moves.

Energy remained interesting with smaller still looking good, e.g. DVN, PTEN, TELL, COG.

Software not bad with moves higher but a lot of doji as well. TEAM gapped upside and managed to hold a decent part of the gain. NOW gapped to a doji as did WDAY, NEWR. Not bad, but not major new breaks in most instances.

Manufacturing held the line with UTX, MMM still looking solid.

Financial: Still a big blah, just holding position.


Stats: +60.14 points (+0.23%) to close at 26091.95

Stats: +26.92 points (+0.36%) to close at 7554.46
Volume: 2.39B (-1.24%)

Up Volume: 1.39B (-280M)
Down Volume: 953.45M (+235.31M)

A/D and Hi/Lo: Advancers led 1.05 to 1
Previous Session: Advancers led 2.45 to 1

New Highs: 146 (+20)
New Lows: 16 (-4)

Stats: +3.44 points (+0.12%) to close at 2796.11
NYSE Volume: 891.742M (+12.02%)

Up Volume: 462.274M (-54.222M)
Down Volume: 411.81M (+159.647M)

A/D and Hi/Lo: Decliners led 1.02 to 1
Previous Session: Advancers led 2.66 to 1

New Highs: 149 (-13)
New Lows: 10 (+1)


VIX: 14.85; +1.34
VXN: 17.81; +0.86
VXO: 14.18; +0.31

Put/Call Ratio (CBOE): 0.78; -0.01

Bulls and Bears:

Getting a bit bullish with a move over 50 while bears dropped right back below 21 after the short break higher. Fear continues to subside.

Bulls up again, but bears moved up a bit as some discomfort with the long recovery rally.

Bulls: 51.9 versus 49.5

Bears: 20.7 versus 21.5

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: 51.9 versus 49.5
49.5 versus 48.6 versus 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: 20.7 versus 21.5
21.5 versus 20.6 versus 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: 2.672% versus 2.654%. Bonds continue bouncing up and down in the range of the past month. Two auctions, a 2 year and a 5 year, and their selling prices were actually inversions.

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

2.654% versus 2.695% versus 2.641% versus 2.641% versus 2.664% versus 2.654% versus 2.706% versus 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: 1.13598 versus 1.13332. Euro recovered from the mid-February selling, now still working laterally below the 50 day MA.

Historical: 1.13332 versus 1.13363 versus 1.14490 versus 1.13544 versus 1.12922 versus 1.12955 versus 1.12616 versus 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: 110.979 versus 110.670. Dollar enjoyed a solid session but after breaking past the February high, faded to close below it.

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

110.670 versus 110.664 versus 110.786 versus 110.848 versus 110.469 versus 110.462 versus 110.945 versus 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: 55.48, -1.78. Oil flubbed it, helped by Trump telling OPEC to 'relax,' that the world "cannot take a price hike." Oil faded over half of the gain accumulated the prior five sessions.

Gold: 1329.50, -3.30. Gold traded mostly flat at the 10 day EMA, attempting to regroup after surging a week back only to sell back down Thursday and giving up that gain.


Not a lot of data -- Housing starts and consumer confidence. The real data starts Wednesday with Factory orders, Powell's testimony to Congress, Pending home sales. Thursday GDP Q4, then Friday Personal Income and spending, ISM.

While earnings are over and trade appears to be priced in (at least for a deal; a 'no deal' is not priced in), the logical area of concern is the economy. The data is not great, but it is not rolling off a cliff. The yield curve is flat at the short end but still upward sloping for the longer term instruments. Thus, no major market peak as of yet, but that does not rule out tests back from this resistance before other moves are made, and as noted, those could simply set up a new upside attempt.

The upside from here is less probable. We are riding some positions we have held for the move's duration. We even picked up some today (CAT, TEAM) that have set up well and look to have more upside. Others are out there, but while many plays were hitting entry points early, they were fading as the session continued. The trade deal is not going to be a huge upside impetus given all the positive leaks. 19% SP500 move. The action was not what we wanted to enter a bunch of new plays.

At this juncture we can still pick up select areas, e.g. energy still looks good as does some software, manufacturing, industrial metals and the like, but we are cautious given this 'good news' less than great move Monday.

Have a great evening!

End part 1
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