Thursday, March 07, 2019

The Daily, Part 1 of 2, 3-7-19

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3/7/2019 Investment House Daily
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Targets hit: None issued
Entry alerts: None issued
Trailing stops: TECD; TME

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The REPORT SCHEDULE is as follows:

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.

Access to all current videos will remain assessable each day using the play links in the reports.

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.


- Large cap indices start catching down to the small and midcaps.
- Even as they fall, many of the large cap leaders are still setting up nicely.
- The 50 day EMA, as discussed earlier week, looks as if it could be Friday's target, but the jobs report may have a bearing on that.
- Possible for a bounce at the 50 day EMA but a deeper test would be very positive for the upside.
- ECB calls 'uncle,' lowers inflation, GDP forecasts, provides banks more cash.
- Some solid leaders are in very good shape to rebound, but it may be just too early. Or not.

The large cap indices give in, follow the small and midcaps lower.

The 'big' question Wednesday was whether some decent patterns in the large cap realm would hold the large cap indices in their lateral moves or if the indices would just throw in to the downside with the smaller caps. Thursday it was the latter.

SP500 -22.52, -0.81%
NASDAQ -84.46, -1.13%
DJ30 -200.23, -0.78%
SP400 -0.85%
RUTX -0.86%
SOX -1.10%
NASDAQ 100 -1.20%

VOLUME: NYSE +4.5%, NASDAQ +9%. Volume moving up to average on NYSE, back higher above average on NASDAQ. Some distribution. Some, but not massive selling.



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Not that there is anything wrong with that; stocks often test after 20% moves, and a 50 day MA test is nothing abnormal after that kind of run (to borrow from the old 'Seinfeld' episode where Jerry was outed when, as he says, he wasn't even in). DJ30, NASDAQ and SP500 fell through the 20 day EMA and look to be heading to the 50 day EMA to join SP400 and RUTX that are both going to touch that level likely Friday. NDX also cracked below the 200 day MA and the 20 day MA; thanks to the strength in the big techs, the 50 day EMA is still 34 points away. That is not bad in itself considering NASDAQ dropped a cool 85 points Thursday.

That leaves SOX, so important to the overall market. SOX is coming back to test the 200 day SMA at 1300, that important level cited when it broke higher in February. Not a bad ABCD pattern setting up, and a 200 day MA test sets it up quite well indeed right at 1300.

Thus, while heading lower, this is not necessarily bad. Not great for plays we entered with the anticipation of moving higher without this kind of test. Thus we have closed out many plays the past few sessions with some targets hit, trailing stops, etc.

Now we watch for the test of that next support to see if it holds. Remember, the 50 day MA is a potential support level, but our analysis this week is looking more to the 50 day SMA because that level is near (in most cases just over) the bottoms of the October/December trading range. Accordingly, the 50 day SMA to the bottoms of the trading range may be where the indices ultimately go on this test -- there is a certain symmetry to that move, namely a right shoulder to a 6 month inverted head and shoulders pattern.

Therefore, we anticipate a 50 day EMA test, perhaps tomorrow, perhaps next week. The Jobs Report may or may not facilitate a move to that level right away. With the algos today you don't know if they will react to a strong report with celebration but also dread of the Fed. Or if the report is weak will they celebrate the a Fed staying on hold or bemoan a weakening jobs market as catching down to the more leading data?

Take the ECB action today, lowering inflation expectations, lowering GDP expectations, ramping up cash available to banks, bemoaning the deteriorating economic condition of the EU. US futures jumped on the news then gave it all back. Okay, so liquidity remains. Much rejoicing. Yea. But, that also shows that after all this stimulus, the EU economies are sliding toward recession. That is really bad news. Socialism is catching up to the EU as it runs out of other people's money (mostly German money). Hey EU, look over at Venezuela; bringing in tons of people with no skills, no jobs, and readily paying them benefits. How is that sustainable? The Europeans have found out the answer, one that was self-evident before this all started: it isn't.

Regardless, over the course of the next week the indices likely test the 50 day EMA and perhaps attempt a bounce there. It may be a successful bounce looking at the rather decent pullback patterns in many leaders, e.g. TSLA, INTC, ISRG, GOOG, FB, XLNX, CMI, UTX, BA -- lots of stocks testing the 20 day EMA in this pullback, simply testing very solid uptrend moves.

If the leaders show strong rebounds off the indices making a 50 day EMA, well, that is a good signal to enter for a renewed move. If they bounce on weak trade and in a rather narrow move, then the deeper test scenario, one to the 50 day SMA and/or trading range lows is likely in order. Either works, though the deeper test just has such a great rejuvenation effect for the upside. If it does not happen, however, it does not happen. Perfection, while sought, is rarely attainable. Get as close to it as you can; if stocks don't test all the way you want, well, deal with it. If they make great moves to start a rebound, it behooves you to step in with at least some money.

Friday is your typical quandary. The past two Fridays the market has rallied, moving up into Monday as well but then selling over the course of the week until the next Friday. The jobs report adds a wrinkle but we have to see how the algos trade it.

The best scenario? The market hates the jobs report and sells to or below the 50 day EMA. The indices then can either sell off into the following week, moving down to that 50 day SMA/trading range support and setting up a great bounce potential, OR the 50 day EMA acts as support, perhaps with an undercut on the number and recovery to a nice doji at the 50 day EMA.

Worst scenario? A gap higher on the jobs report. Not necessarily death, but a more treacherous test to buy into. The indices really need to taste the 50 day EMA and hopefully the 50 day SMA to put real bids into the stocks.

That said, I have to say there are good patterns out there. Some to look at even if we don't have plays on them (you can enter some partial positions if they move).

TSLA: A very interesting four month downward pointing wedge, the past three days testing the bottom of the wedge. Those tend to break the opposite way the wedge is pointing, in this case down. Thus an upside move from here is a good entry, picking it right off the bottom of the wedge and looking for a breakout on the recovery.

ISRG: Nice 5 month-plus base, right now testing back to the 50 day EMA and showing a doji with tail. Excellent setup to move higher.

GOOG: Who says you cannot add to the position? Testing the 10 day EMA on the intraday low, lower volume on these 2 days of selling. If it undercuts the 10 day EMA on the jobs report, tapping the 200 day SMA on the low and rebounding to a doji, nice 1-2-3 test of the break higher in its nice pattern.

INTC: Broke out mid-February in its 9 month cup base, rallying to early March. Fading the past 3 sessions, falling below the 10 day EMA. There is a gap from late-ish February, and a test lower near 51.50, particularly with a doji with tail, sets it up well to continue the break higher.

BA: Nice hammer doji Thursday at the 20 day EMA in a 5-session pullback form a new high hit on the open on 3/01. BA is a dynamo market leader. A bounce form here, playing a move to 460 with some June 21 2019 420.00 strike options gains around 70%.

FB: Similar to GOOG, a breakout, a test through Thursday (to the 200 day SMA it just cleared) leaves FB in a rather decent position to continue its break higher from a very nice cup with handle base.

Those are some super quality names in very good position. A further selloff Friday and you see if they test lower and rebound to show the patterns are holding. That sets up some pretty good entry possibilities. If there is no test but stocks rally off the jobs report? While not the favored scenario, the above stocks are so well positioned that if they post solid upside on solid volume, the market just may not want to wait.

Okay, that is great. But don't get too lathered up. Take a look at those index charts again. Long, steady 20% move off the lows, bumped against range highs established before the bomb lower, fading back from there. The charts beg for more downside to really cleanse the system. Thus, while some of the above stocks may make moves Friday post-Jobs, we are not loading the boat just yet. Pick up some positions, then see how the indices react to start next week -- remember the pattern of late, up on Friday, Monday sometimes up, but this week the upside was over at the open. If that happens, okay, we wait with the powder we kept dry for the test/pullback/semi-correction to run its course at some of that lower support, then watch for those stocks breaking sharply higher once more from good pullbacks.


Stats: -200.23 points (-0.78%) to close at 25473.23

Stats: -84.46 points (-1.13%) to close at 7421.46
Volume: 2.46B (+9.33%)

Up Volume: 789.26M (+178.52M)
Down Volume: 1.64B (+10M)

A/D and Hi/Lo: Decliners led 2.14 to 1
Previous Session: Decliners led 3.72 to 1

New Highs: 33 (+1)
New Lows: 68 (+29)

Stats: -22.52 points (-0.81%) to close at 2748.93
NYSE Volume: 918.186M (+4.49%)

Up Volume: 256.997M (+134.367M)
Down Volume: 648.07M (-98.597M)

A/D and Hi/Lo: Decliners led 2.29 to 1
Previous Session: Decliners led 2.86 to 1

New Highs: 71 (+11)
New Lows: 52 (+19)


VIX: 16.59; +0.85
VXN: 19.59; +1.36
VXO: 17.10; +1.91

Put/Call Ratio (CBOE): 1.12; +0.06

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: 2.641% versus 2.693%. Bonds are on a 4-session surge after flopping down to the 200 day SMA. 122.45ish is resistance.

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

2.693% versus 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: 1.11910 versus 1.13123. Euro bombs lower below the lows in the range from November to February.

Historical: 1.13123 versus 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: 111.483 versus 111.624

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

111.624 versus 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: 56.66, +0.44.

Gold: 1286.10, -1.50.

End part 1 of 2
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