Wednesday, March 06, 2019

The Daily, Part 1, 3-6-19

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3/6/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: FB
Entry alerts: SAVE
Trailing stops: RMBS; SIMO
Stop alerts: AMD; HMY; NVDA; SLB

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- Small and midcaps break lower through near support.
- Large cap indices hanging in at support.
- SOX down harder, holding support, is the swing index.
- Large caps still solid for the most part, setting up upside patterns.
- Jobs report Friday, weaker overall economic data, China weaker as well.
- Looking at some more downside just in case.

The October/December range resistance remains recalcitrant (wow--quite the alliteration to open the report) as stocks started lower premarket, moved higher to the open, but then . . . faded the move. Sold negative early, faded to midday, and then -- could not put together a bounce. No sharp selloff overall, but a serious lack of bids at the moment.

SP500 -18.20, -0.65%
NASDAQ -70.44, -0.93%
DJ30 -133.17, -0.52%
SP400 -1.38%
RUTX -2.01%
SOX -1.70%
NASDAQ 100 -0.62%

VOLUME: NYSE +2%, NASDAQ +4%. NYSE trade edged higher but remained right around average as it has done for the past four sessions. NASDAQ traded edged higher as well, also remaining in the range of the past several sessions, still above average.

ADVANCE/DECLINE: NYSE -2.9:1, NASDAQ -3.7:1. Small and midcaps dropping, chips falling, and those took the toll on breadth. Note how much stronger breadth is on the downside versus the upside breadth on upside sessions.


Now, when you look at the large cap indices, not many issues. Yes, financials are still utterly useless and even FB and GOOG didn't put in the major moves (though ROKU shot higher again), but they did not sell off.

Not so much the case with the chips, small caps, and midcaps.

RUTX fell from the 10 day EMA to below the 20 day EMA. That also took it through the December pre-plunge peak. It is somewhat in no-man's land, way over the 38% Fibonacci retracement of the rally from December (1474ish; closed at 1536.82) and the bottom of the range (1470ish). That is a pretty hefty drop, but with this kind of break lower, that is the target you have to look at as a likely candidate downside target. On the positive side, that would set up the possible bottom of a right shoulder to an inverted head and shoulders pattern forming since October.

SP400 posted a move similar to RUTX, dropping through the 20 day EMA and all the tops of the OCT/DEC range. First to break, first to drop. Okay, only one to break it. That makes the failure, the decline, a bit more significant. As with RUTX, still way over the 38% Fibonacci retracement (1801; closed 1881). The 50 day SMA (1853) is at some other interim support right now, so it is likely where SP400 first hits and tries to hold for a bit.

SOX and its larger cap chip components dropped sharply, but basically to the 20 day EMA. There is a gap from mid-ish February from the 200 day SMA (now at 1300) to fill. I would bet it will hit that level on this decline. SOX is, as I always note, key to the market. If the chips are down, the market tends to follow. If they are up, you get the picture. Some of the bigger chip names are under pressure, falling back to the 50 day MA after their bounces. SOX is fading after rallying to near the tops of the March to October base that broke down in October.

NASDAQ faded but no breakdowns as impressive as the small and midcaps. Sold to near the 200 day SMA on some rising trade -- a bit of distribution but not huge selling. Still in the lateral range, aided of course, by the newer leaders (e.g. INTC, MSFT, CSCO) and born again leaders (FB, GOOG).

SP500 faded to the 20 day EMA. Bumped the top of the Fall range, faded, still in the lateral range. A bit more volume, but right at average, not ramping up. Not bad. Perhaps there is some rotation back toward the more stoic and staid large caps.

DJ30 faded to the 20 day EMA, the level it has bounced at on the lows all week. Modest volume, no real selling, just taking it back in the range. As with SP500, there is the possibility of rotation to these stocks as they are not selling off, just working on their patterns with light volume.


FAANG: AMZN was an anchor, dropping right back to the 10 day EMA. FB added a bit more upside while GOOG took some time off after a very solid surge. NFLX surprised with a rebound. AAPL, just more lateral movement. Still, these are helping NASDAQ hold just fine.

Industrials: Still solid in their patterns. UTX holding very well.

Machinery: Starting to struggle, e.g. DE, CAT. CMI still looks good. TEX not bad, BA in a nice pullback.

Consumer products: too solid, never a great sign for growth. PG, CL, CLX in decent patterns.

Financials: V, MA in good tests of their moves. The banks are the same, sagging some, still in the lateral range, still yawn-inducing.

Transports: SAVE dove lower and we got in early -- -5+%. AAL weak as well, DAL trying to hold. KSU (rails) was up, CSX not a bad 20 day EMA test, NSC a very nice 20 day EMA test. Truckers continue to struggle. SAIA selling off again. Two weeks down and near the 50 day SMA. JBHT is at the 50 day; perhaps it can bounce and help the truckers get it in gear upside.

Software: Still a leadership group that is now a struggling leadership group. DATA dropped below the 50 day MA. NOW not bad at the 20 day EMA with a fade. TEAM trying to hold at that level as well. VMW gapped lower, recovered the 20 day. OKTA, WDAY both moving laterally at the 50 day MA. At least they are trying to hold the line.

Semiconductors: Big caps struggled -- AMD, MU, AMAT, LRCX -- all dropping rather sharply to the 50 day MA. AMBA gapped higher on earnings but gave back more than it closed with. INTC in an easy test as are, XLNX, TXN, QRVO, MLNX. Not a great session overall, but also many of the stocks held up well while some big names sold.

Energy: On again, off again is back on. XOM fell back below the 200 day SMA and had to really rebound to hold it on the close. CVX still solid. SLB sold, HAL sold hard to a lower low just below the early February low.

Metals: Steel just like that sold, e.g. STLD (to the 50 day EMA), AKS (to the 50 day SMA), ZEUS bombing through those levels. SID still rallying, however. FCX not bad at the 20 day EMA.

Drugs: No haven. BIIB broke below the 50 and 200 day MA's. AMGN bombing lower. PFE broke lower 2.4% toward the 200 day SMA. MRK, LLY in more modest tests of near support.


Jobs are Friday, and Wednesday ADP was so-so. Topped expectations and January was written up to 300K from 213K. Impressive. The market was 'so what?' Ahead of the Friday report and the February payrolls, could be the market is just idling to see what happens.

Trade: More speculation of a deal soon but not a great deal.

Talk continues that Trump could throw all of the careful maneuvering of China with the tariffs, etc. overboard in order to get some kind of deal and push a market rally. On the other side, some are saying Trump will walk if he cannot cut a good deal. There is recent precedent, e.g. North Korea.

If Trump wishes for a market rally, if all Trump gets is more purchases in dollar amounts, then the market response will be muted at least to the upside. Perhaps relief a deal is reached and tariffs removed, but it won't be huge because the deal is not huge. Just a potential obstacle removed.

As for China itself, deal or no deal, one economist says its GDP drops to 2% in the coming decade as its growth curve necessarily flattens. When you think about it, right now other countries are taking many of China's jobs as their labor is cheaper and companies prepare for the possibility of no deal or a continued hostile future with China. Canada, Australia are two countries with relations souring even more than the US/China. If the rest of the world tires of China's theft (and they are), China's list of allies grows thin.


Stats: -133.17 points (-0.52%) to close at 25673.46

Stats: -70.44 points (-0.93%) to close at 7505.92
Volume: 2.25B (+4.17%)

Up Volume: 610.74M (-409.26M)
Down Volume: 1.63B (+510M)

A/D and Hi/Lo: Decliners led 3.72 to 1
Previous Session: Decliners led 1.33 to 1

New Highs: 32 (-6)
New Lows: 39 (+4)

Stats: -18.20 points (-0.65%) to close at 2771.45
NYSE Volume: 878.731M (+1.97%)

Up Volume: 122.63M (-244.149M)
Down Volume: 746.667M (+263.764M)

A/D and Hi/Lo: Decliners led 2.86 to 1
Previous Session: Decliners led 1.1 to 1

New Highs: 60 (-21)
New Lows: 33 (+11)


VIX: 15.74; +1.00
VXN: 18.23; +1.17
VXO: 15.19; +1.00

Put/Call Ratio (CBOE): 1.06; +0.17

Bulls and Bears:

Bulls continue their recovery, bears continue their decline after they merged in late 2018.

Bulls: 52.4 versus 51.9

Bears: 20.4 versus 20.7

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: 52.4 versus 51.9
51.9 versus 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: 20.4 versus 20.7
20.7 versus 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: 2.693% versus 2.715%. Bonds rebound for a third session after bombing to the 200 day SMA. Up to the 50 day EMA, so now we see how much bounce there is in this bounce.

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

2.715% versus 2.724% versus 2.759% versus 2.717% versus 2.673% versus 2.636% versus 2.672% versus 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

EUR/USD: 1.13123 versus 1.13050. Euro sold off, trying to hold at some support at 1.130.

Historical: 1.13050 versus 1.13344 versus 1.13650 versus 1.13725 versus 1.13790 versus 1.1391 versus 1.13598 versus 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

USD/JPY: 111.624 versus 111.845. Dollar sagging again to test the 200 day SMA in a tight lateral move after breaking upside last week.

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

111.845 versus 111.856 versus 111.921 versus 111.433 versus 110.873 versus 110.53 versus 110.979 versus 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: 56.22, -0.34. Tight, tight lateral move over the 20 day EMA. Still looks ready to break higher again.

Gold: 1287.60, +2.90. Holding 1280 after gapping below the 50 day MA Monday.


Day before the February jobs report. The large cap indices are testing in an orderly fashion, holding near support. RUTX, SP400, recent leaders, are flipping to some selling. SOX is struggling but for now is at the 20 day EMA.

Who wins? Do the large caps get rotation their way and move higher while the growth areas sell back some gains? Or are the growth areas the leaders that moved first and the large cap indices follow?

Still very good patterns in the biggest techs and industrials. Some issues, however, as machinery falls, drugs struggle, software still struggles but hanging on. SOX becomes more important as it splits the difference between the two groups and is a very important market indicator.

So we watch how the chips hold the line along with the big caps. The small and midcaps look ready to test lower -- so much for the economic indicator of future growth?

You know, just because they sell does not mean any expansion is over. They rallied like crazy off the lows. All the indices did. A pullback to the bottom of the pre-selloff range is, despite a 4%+ drop, normal. Big move up, test of key support to reload, then a continuation upside.

The large cap indices could follow. That is why we watch them and of course the chips. Most chips are still in overall good to decent position -- the pullback is not wrecking them, just disrupting the bounce from the lows for now.

We are going to look at some more downside on the weaker areas, see if money rotates to the UTX-like areas (we still have a UTX play ready to go), and see who wins near term. I expect the small and midcaps to test down toward the bottom of the trading range given the type of selling they showed today. We will see if the market splits and the large caps hold or if they fold and follow the smaller issues.

Have a great evening!

End part 1
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