Monday, February 04, 2019

The Daily, Part 1 of 3, 2-4-19

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2/4/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: CRM; GOOG; TECD
Entry alerts: AAPL; NEPT; NTNX; SAVE; TCBI
Trailing stops: None issued
Stop alerts: ADBE

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- Soft start but the bids return, stocks rally to the close.
- Volatility fading rapidly, reminiscent of early 2018.
- Rather quiet news feed and the news that was appeared rather Fed neutral.
- Software stocks rally again, most FAANG.
- GOOG beats but costs rise, ad revenue declines.
- Still waiting for other groups to join a la semiconductors, and a pullback by the recent leaders will provide them the chance.

After a rally into the weekend and with DJ30 bumping resistance at the 200 day SMA, stocks started the new week soft pre-market, soft at the open. A half hour into trade, however, and the bids returned, just as the monarchs, ducks and geese, the swallows at San Juan Capistrano. Okay, a bit overboard there, but with a market trending higher and nothing negative released, a softer open is often met with more bids.

The bids did return and stocks continued to rally right on into the close. Growth led the move with NASDAQ and RUTX both topping 1% gains. Another day at work in the recovery.

SP500 18.34, 0.68%
NASDAQ 83.67, 1.15%
DJ30 175.48, 0.70%
SP400 0.86%
RUTX 1.03%
SOX 0.50%
NASDAQ 100 1.23%

VOLUME: NYSE -10%, NASDAQ -12%. Not a surge of buying to really get February off, but there was plenty Friday. Trade slipped back below average on both NYSE and NASDAQ. Not a ton of upside power, but the volume Friday was solid.

ADVANCE/DECLINE: NYSE 2.1:1, NASDAQ 2.2:1. Not bad. Not great, but not bad.

The move took DJ30 through the 200 day SMA. SOX stalled just below the 200 day. NASDAQ and SP500 made solid advances on that level, playing catchup to the other two.

RUTX and SP400? They posted solid gains, but they started far behind the others and are a long way from the 200 day SMA. Hey, plenty of room to run, right?

Catalysts? Nothing bad. Sounds simplistic, but it was quiet. China is closed for the week, observing the Lunar something. TSLA is buying MXWL. CLX beat decently.

Factory orders fell 0.6% in November but that was better than the -2.1% in October. Better, but still weak enough not to invoke the Fed.

Durable Goods Orders Final for November rose 0.7% from October's -4.3%. Up but not overpowering. Business investment fell 0.6%. Better overall but still weak enough here as well to avoid the Fed's concern, at least for an overheating economy.

It was rather quiet. Even the news was treated very casually on the financial stations. It was a quiet session that saw the bids return from early weakness and push the stock indices upside yet again, continuing the third leg of the rally off the December low.

Afterhours GOOG reported earnings and beat expectations, but (and all of the FAANG have had 'buts' in their earnings) spending/costs surged. Heard that story before and just recently: AMZN. AMZN is back to investing in the future, and that causes it to throttle back growth expectations after a couple of years reaping the reward of other previous investment periods. Advertising prices also trended lower, cutting to GOOG's bread and butter.

GOOG trades around 1100 after bounding of 1092. For reference, there is an upside gap four sessions prior closing at 1089; it is close to getting filled. If the open Tuesday fills that gap that could be the low for the post-earnings selling. In any event, we took some more gain on the options ahead of time, banking 60+%. That works.

The action remains solid in the leadership groups though the chips took some time off again after good moves. Well, some did. The group is still yielding good new breaks higher even as other earlier leaders test. Software is also strong, posting another strong session, now almost a good week of gains.

Indeed, the volatility is so low it reminds you of the prior December and January. Stocks started soft, chugged higher all session, leading stocks breaking out or continuing higher in their trends. All seems great.

Of course, after a week of surging by cloud stocks they are not in buy position, and indeed we have a bit of gain on these moves. ADBE broke out over the 200 day SMA today on volume; we closed the downside and now will look at the upside -- a bit extended, but it is going higher even if it pauses again as it did Friday. NTNX started a break higher and we picked it up on the day.

While cloud software has put in a week of gains, others are trying to set up for their next moves, e.g. financials. Two weeks of lateral movement after the last gain has them in decent position -- they just need to move. We did pick up some TCBI as it started higher.

We also picked up some AAPL as it broke higher off the Thursday/Friday pause after earnings. A gap up, a pause, then a continuation; that is the entry. FB did the same, just with a one-day pause Friday. NFLX continued back up after rallying up through the 200 day SMA again. GOOG broke through the 200 day SMA on volume ahead of earnings. We banked some gain as noted, and it is trying to fill the gap around 1090ish afterhours, not necessarily a bad development.

Okay, so there is continuing leadership, other areas are trying to form up to provide additional leadership, and low volatility. New breakouts are good, new leadership is necessary. Waiting for financials and China to really contribute, joining semiconductors as a new leadership group.

That said, surging groups such as software will pause and test; it is easy to fall into the 'every day stocks have to rise' mentality with the low volatility setting in. Accordingly, take some gain on good surges, wait for their tests, and if all is well, move in again after the test. Also, however, watch the potential new areas to see if they provide opportunity upside while the current surging leaders take a pause. That is the virtuous rotation that the market showed last January and that was a pretty solid result.


Stats: +175.48 points (+0.70%) to close at 25239.37

Stats: +83.67 points (+1.15%) to close at 7347.54
Volume: 2.1B (-12.5%)

Up Volume: 1.38B (-140M)
Down Volume: 673.45M (-177.04M)

A/D and Hi/Lo: Advancers led 2.18 to 1
Previous Session: Advancers led 1.37 to 1

New Highs: 59 (+2)
New Lows: 18 (+1)

Stats: +18.34 points (+0.68%) to close at 2724.87
NYSE Volume: 789.967M (-10.35%)

Up Volume: 545.522M (+76.936M)
Down Volume: 229.199M (-160.117M)

A/D and Hi/Lo: Advancers led 2.07 to 1
Previous Session: Advancers led 1.33 to 1

New Highs: 62 (-37)
New Lows: 6 (-4)


VIX: 15.73; -0.41
VXN: 19.68; -0.12
VXO: 15.07; -1.60

Put/Call Ratio (CBOE): 0.84; -0.29

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: 2.725% versus 2.684%. Bonds gapped lower, tested the mid-December upper gap point and rebounded to close. Okay, tested the break higher -- and more -- and now it shows if it can bounce.

Historical: the last sub-2% rate was in November 2016 (1.867%). 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: 1.14350 versus 1.14554. Doji at the 10 day EMA. Trying to put in a higher low and perhaps this time break higher and move through the 200 day MA.

Historical: 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: 109.987 versus 109.530. Dollar rallied up to the 50 day MA, part of a 3-day rebound to test that key level. Dollar won't die right now, but this is an ABCD downside pattern to beware of.

Historical: Last below 109 in June 2018: 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: 54.56, -0.70. Trying to get up off 52.50. Good move Friday, faded to start the week, still trending higher near term.

Gold: 1319.30, -2.80. Fading to test the recent surge, day two of the test. Tapped at the 10 day EMA on the low, rebounded nicely. Still looking upside positive.

End part 1
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