Thursday, February 21, 2019

The Daily, Part 1 of 2, 2-21-19

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2/21/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: None issued
Entry alerts: None issued
Trailing stops: SQ
Stop alerts: GOOG; OSTK

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Market Summary Video, Plays and Play Videos, and Play Table with play annotations will issue Wednesday, Weekend.

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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.


- Stocks a bit soft early, economic data induces a downside session, albeit mild thus far.
- Wednesday leaders under some pressure as they feel the indices' pain near the top of the range.
- Obviously the resistance is now in full play and you watch the recent stronger areas as to how they react.

The slow grind higher into resistance ran into, well, resistance. Stocks were weak from the pre-market, fading farther after the morning data showed significant weakness while some pundits weighed in on just what the FOMC minutes from Wednesday mean. The opinions were wide-ranging, indeed polar opposites in some cases. When in doubt, the market punted.

SP500 -9.82, -0.35%
NASDAQ -29.36, -0.39%
DJ30 -103.81, -0.40%
SP400 -0.35%
RUTX -0.39%
SOX -0.74%
NASDAQ 100 -0.38%

Trade was again on the front burner as the US/China talks are ongoing. Reportedly there are six memorandums of understanding in the draft process, covering not only China buying more US 'stuff' (indeed it is said to have offered to by another $30B of beans, etc.) but also technology transfer, IP theft and the like. That is impressive, but until I see it -- and see a sound plan for verification -- I won't believe it. China would be agreeing to dismantling its vehicles for acquiring technology, and unless China is having a Gorbachev moment and realizes it cannot continue on as it has, then it cannot agree to give up its thieving ways -- unless of course its fingers are crossed behind its back when the documents are signed.

Even the positive-ish trade news could not rescue stocks from the doldrums. First, not all trade news was great: China said it was suspending imports of Australian coal 'indefinitely' there looks to be another trade war budding, or indeed, started.

Second, domestic economic data was again weaker.

Durable Goods Orders, December were not great but all transports: ex-transports were 0.1% versus 1.2% durables overall. Business investment was bad at -0.7%, making three straight months of negative numbers, the longest streak since late 2015.

Philly Fed, February fell to -4.1 from 17.0, totally swinging and missing at the 12.0 expected. New orders bombed to -2.4 from 26+. Unemployment remained positive, but as you know, employment lags actual economic activity.

Existing home sales, January dropped 1.2%.

Leading Economic Indicators, January -0.1 vs +0.1 expected. Not a big deal for the month, but it marks the first time the LEI showed back to back declines since 2016.

FAANG continued to struggle -- kind of. Most of the damage was GOOG. FB was down some, but it was just more of its decent flag. Test. Not a lot of excitement in the group outside of GOOG, but that can be good as they get somewhat forgotten, can go about basing, then perhaps come back and do some leading.

Energy was strong Wednesday but backed off Thursday.

Machinery is not bad. CAT tested its break through the 200 day SMA and looks good. TEX testing after its Tuesday surge to the 200 day. DE bounced a solid 1.86% off the 50 day. CMI testing its break to a higher recovery high. These look good. Room to run in CAT.

Manufacturing: MMM still in a nice lateral test, setting up. EMR moving laterally under the 200 day. UTX testing its break over the 200 day. IR is holding at the late November highs.

Home-related: HD in a very nice tight lateral consolidation. DHI gapped lower but recovered the 200 day SMA in a still-good pattern. TOL moving up again off a 20 day EMA test. TREX still testing a good move higher.

Financials: The regionals took a very modest rest on the session, still looking good. The big names remain in decent shape but still looking for a real break higher. V is very interesting in a 1-2-3 test after gapping upside Monday.

Software: MSFT makes a solid upside break on volume. TEAM, COUP, WDAY, HUBS continue pretty decent tests of really great runs.

Chips: A bit of a pause after some good Wednesday moves from RMBS, UCTT. AMD, MU, NVDA still trying to set for a new move. INTC testing laterally after a ince surge through last Friday.

Metals: After good Tuesday/Wednesday moves, gave back some Thursday, e.g. AKS, FCX, CLF.

Still good leadership and good patterns, but they certainly had few bids Thursday.


To view, click on the following links:

The indices backed off from the resistance they just bumped. Not that surprising given the upside moves to this next resistance. The billions of dollars question is whether this marks the top of the recovery from the December low.

Of course that is a multi-headed hydra -- a 'top' can take many forms, e.g. a pause to consolidate, a more aggressive decline for a deeper test, a new basing process, a rollover to drop back to some support point or conceivably the December low.

At this juncture, no one really knows. Thus, we closed some positions that started to falter. Most were off on the session but most did not falter. If you want to talk faltering, look at STMP afterhours. It closed at 198; it is trading at 109, gapping to the 2017 April/May lows, falling from a huge 19 month head and shoulders.

I posit the 2018 top is still in place and, as Crash Davis (Kevin Costner) said in 'Bull Durham,' you have to respect the streak. Similarly, you have to respect a massive 12 month top that broke lower for a month of ugly. The recovery is impressive, but as you would expect, it is running into overhead supply. Other stocks are stepping up. The question remains open: will they continue to rise on their own while the overall indices struggle due to the struggle of mega-caps that influence most of the index moves?

If a position was struggling, unable to close decently, we closed it. If things don't improve and the stocks that just broke higher reverse, we will close a lot more. Prudent, just makes sense given the circumstances. If they are able to weather the resistance with normal pullbacks and start back upside, there is plenty of opportunity to move in again.

SP500 still struggling below the range peaks (starting at 2800), but it did break above the 200 day SMA a week back and is in a lateral move. Not bad, but of course nowhere near breaking the resistance.

NASDAQ continues bumping at the 200 day SMA and just below the November peak in its trading range. Huge cap FAANG stocks are either going nowhere or fading (e.g. GOOG). Some are bucking the trend, e.g. MSFT, and that provides some interesting upside intrigue, but we know MSFT is not an island. It is also not a TEAM or similar software stock.

SP400 further bumps the top of its Oct/Dec range, just over the 200 day SMA. Impressive move to this point, showing impressive leadership. After a lateral consolidation will it show more leadership with a new break higher?

DJ30, similar to SP500, is bumping the first resistance in the range, hitting 26,000 on the week and stopping there -- for now. That also marks the early December peak. Round number and the market likes to use these as bottoms and tops.

RUTX paused after two weeks of gains, showing a doji below the 200 day SMA. Did bounce off the low of the session as buyers still came back in. Along with the midcaps, the small caps are a new-found market leader group, but they also likely need to consolidate more along with SP400.


Stats: -103.81 points (-0.40%) to close at 25850.63

Stats: -29.36 points (-0.39%) to close at 7459.71
Volume: 2.12B (-2.75%)

Up Volume: 840.12M (-279.88M)
Down Volume: 1.25B (+316.99M)

A/D and Hi/Lo: Decliners led 1.39 to 1
Previous Session: Advancers led 1.18 to 1

New Highs: 75 (-28)
New Lows: 17 (-5)

Stats: -9.82 points (-0.35%) to close at 2774.88
NYSE Volume: 851.988M (-8.43%)

Up Volume: 269.933M (-283.597M)
Down Volume: 572.876M (+209.331M)

A/D and Hi/Lo: Decliners led 1.57 to 1
Previous Session: Advancers led 1.54 to 1

New Highs: 90 (-9)
New Lows: 8 (+1)


VIX: 14.46; +0.44
VXN: 18.19; +0.17
VXO: 14.86; +0.54

Put/Call Ratio (CBOE): 0.93; +0.14

Bulls and Bears:

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

Bulls: 49.5 versus 48.6

Bears: 21.5 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: 49.5 versus 48.6
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: 21.5 versus 20.6
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: 2.695% versus 2.641%. Bonds gapped to the 50 day MA, back to the bottom of the recent February range.

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

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: 1.13363 versus 1.13390

Historical: 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: 110.664 versus 110.786

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

110.786 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: 56.96, -0.20. Pausing after a good rally off the 50 day MA.

Gold: 1327.80, -20.10. Flopped back to the 10 day EMA and the late January high.


LOTS of Fed speakers Friday. As most of the poser-hawks from last year molted into mourning doves, we expect more of the market reassurances to issue forth. Can't have the market ruffled by believing the Fed could go against it. I am being a bit chippy, but with a point. There is no reason to have a body to micromanage rates and the currency because what has happened invariably happens: more and more power is ceded/taken and over time what was a governing body to help manage short term in a serious crisis is now a full-time market and currency manipulator. Markets now look to the Fed more than they look to the market's own pricing mechanics. THAT is the sign of a system that is amiss. That is how they did it in Russia and how they do it in China. There are no markets, just levels the powers that be set. That is WAY, WAY too much power in the hands of people who only have theories they have only read about and theorize as to the outcomes if applied. I don't want my wealth and my future decided by some people who have never done, just theorized.

But I digress, though with a point.

It looks as if the indices have made the move to resistance. They can certainly hold their ground and consolidate, setting up a new break higher. Much depends, however, upon the new groups attempting to break higher and render some leadership. Will the money continue to seek them and show up in bids? Or, will the money just put to them be yanked out and they reverse? If the former, we stick with positions that hold up and move up. If the latter, that is a pretty solid sign of trouble, that the recovery from December is going to drop back some undetermined amount -- based upon pundits from none to a full drop back to the December low.

Thus, while we purchased new positions on stocks in those new areas moving up, we also closed out quite a few the past couple of sessions, positions that showed poor action. We will remain vigilant in that respect, particularly with the areas that just started higher and then reverse the moves on some volume. Not a good sign the indices are going to move through resistance and indicative they will make that test.

That said, you have to like how CAT, HD, MMM, TEAM are setting up and how MSFT broke higher Thursday. Quality stocks holding up in good patterns are a very good indication the market is just resting/pausing, and after a consolidation of some sort will be ready to go again. We will see; I am not all that sanguine it can do so, but as always will play what the market gives to play.

Have a great evening!

End part 1 of 2
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