Saturday, March 02, 2019

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

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3/2/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: ZS
Entry alerts: GOOG
Trailing stops: None issued
Stop alerts: None issued

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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.


- A week that tested resistance, faded, held support, then started back upside.
- Friday new money flowed in for the new month.
- US economic data remains on and off, but still expanding.
- China economics hurt then help stocks while a possible 'remarkable, historic' trade deal is hyped.
- Indices show no sellers and indeed more stocks are setting up very decent upside patterns.
- Indices now set to take on the range tops again.

It would appear that new money did not wait for the new week. March began Friday, and after a high-volume stagnant end to February, March blew in some solid index gains. After some rather tepid US economic data -- yet again -- many see the Fed's easy money policy as appropriate, or that China's on again/off again economic data ('on' Friday with better manufacturing data after Thursday's extraordinarily weak import/export data) trumped the weaker US data. Or perhaps Larry Kudlow's extolling the possibility of a "remarkable, historic" trade deal had something to do with it. Or, it was just time for new money to hit the market on a new month.

Whatever the cause or synergistic melding of events, stocks gapped higher, held the gap -- at least after a morning dive back to near flat -- and closed with some rather decent gains.

SP500 19.20, 0.69%
NASDAQ 62.82, 0.83%
DJ30 110.32, 0.43%
SP400 0.79%
RUTX 0.89%
SOX 0.96%
NASDAQ 100 0.76%

VOLUME: NYSE -25%, NASDAQ -6.5%. Volume faded big time on NYSE after that end of month spike, but trade was still above average. Ditto NASDAQ.

ADVANCE/DECLINE: NYSE +1.8:1, NASDAQ +1.9:1. Very so-so breadth versus the move.

As far as the indices, there was not anything really new accomplished Friday. Last week the indices bumped resistance (or in SP400's case, continued the break) then faded modestly. Friday's new money injected new life, but as noted, did not break that resistance. Constructive action all week as the indices and stocks tested back to near support.

No breakouts Friday for the indices perhaps, but they tapped resistance, faded to near support, then got right back at it. Indeed, stocks such as GOOG broke out over some resistance and AMZN actually showed some life on much better volume after four weeks of dormancy. Many other stocks continue to move well or set up as well across many sectors and industries: software, chips, drugs, energy, healthcare -- there is enough support to fuel a continued move and of course the breakout from the October/December range.


The US data was about as on and off as the Chinese data, though the US reports still show an economy that is growing while Chinese data shows an economy that was/is teetering and desperately craving the stimulus the Chinese government started pumping again the past few months.

Thursday GDP was lower than Q3 (no surprise) but was stronger than expected. As I noted in discussing the data, the internals were very positive, e.g. private R&D grew at an all-time record pace. That bodes very well for future activity. Disposable incomes grew. The data perhaps was not as pleasing for the here and now, but it suggests the seeds for continued and sustained expansion are being planted by what the new US socialist/communist party calls the accursed, capitalist, free enterprise private sector.

Friday saw disappointing spending and income data.

December income jumped 1.0%, easily topping expectations at 0.3% and November's 0.3%. January, however, fell -0.1 when +0.3% was expected.

December spending dropped 0.5% from +0.6% in November, the largest decrease in 9 years. That jumped the savings rate to over 7%, and that had most pundits shaking their heads, noting the data must be wrong.

No, it was not a great economic story for the day. Hey, at least bonds are selling and interest rates are rising, taking a lot of the flat out of the yield curve. That suggests the back and forth in the economic data is just a hangover from the Fed's tightening into a slowdown. It suggests that if the Fed doesn't turn back to tightening mode just yet and the government doesn't go as completely nuts as the new communists -- oh I guess they want to be called socialists -- in our government want in terms of taxes, regulation, etc., then the US economy will resume its expansion.

Look at the midcaps and small caps: after lagging the move, they both surpassed their large cap brethren and SP400 already broke over the top of its October/December range. Those indices are domestically tied, harbingers if you will, of the domestic economy. That they rallied to market leadership after languishing in market . . . laggardship (?) . . . also indicates the Fed stopped perhaps just in time to prevent a recession. For now.

Even so, we did not buy a ton Friday. We bought GOOG on its breakout. We took some gain on ZS after banking gain earlier in the week on ULTA, V, MU, CRON -- stocks are still moving. After last week's test and the Friday bounce we will see if the bids continue to push in. After testing resistance, fading modestly and orderly, then starting to rebound off near support, we will see if the real bids come back in and start moving the good patterns up and defy the odds and break the indices upside out of their pre-selloff ranges.



All but SP400 bumped at or near the top of the range, faded to near support, then posted decent moves Friday. Not breakouts, just coming back up after the initial probe at resistance. Fairly constructive, and now we see if the indices can turn something upside out of the action. The indices look as if they are going to take a shot at the resistance before testing more.

SP400: Extended its break over the top of the OCT/DEC range through Monday then faded to test the range top. Friday a decent bounce but the move was not all that inspiring.

NASDAQ: Bumped the November peak Monday, the mid-high in the range tops, faded to the 200 day SMA, gapped upside Friday. Closed just over the November high, thus putting in a new closing high for the recovery. A little help from GOOG and some other mega-caps helped. Still, it was no major move in itself, though the work on the week was, as noted before, was constructive.

RUTX: Tapped the top of the range Monday, faded to the 10 day EMA, then back up Friday. Very solid test and Friday bounce. Promising.

SP500: Nice tap at the top of the range, fade to the 10 day EMA, and gap upside Friday. Not bad, aided by many drug stocks. If the financials would join then SP500 has a shot at the breakout.

DJ30: Very similar, but a very tight range as well. Holding the 10 day EMA and right at the range tops. No breakout yet, but as noted many times, no sellers running in to sell it or any of the other indices.

SOX: Came within striking distance of the top of the March/September range then faded to test. Orderly, holding near support, gapping upside Friday. Chips started to lead finally and are still in that mode.


Semiconductors: Most tested last week with the rest of the market, leaving pretty good possibilities for the coming week. LRCX still in a nice test. COHR, VSH, AMD, BRKS, TSM -- many nice pullbacks. Even NVDA. XLNX continued upside in its own world.

Software: Most leaders pulled back including software, but to a much lesser degree. Then, as leaders do, they started upside ahead of the rest. TEAM jumped again Thursday and Friday. ZS exploded higher on earnings, though it was dormant until Friday. NOW started upside midweek. NEWR solid. VMW jumped on earnings. PANW testing nicely after earnings gapped it higher.

FAANG: Dormant for a month, there are a few signs of life. GOOG started upside with a breakout. AMZN showed a move up from a month of a flat range. AAPL still in its four week lateral range. NFLX was down on the week, but holding the 20 day EMA. FB spent a third week at the 20 day EMA.

Drugs: Some recovering nicely, others continue working. PFE is starting to show good upside volume in a decent pattern. MRK continued climbing the 10 day as LLY really surged on the week.

Financial: V, MA enjoyed a good week. JPM, C still in 7 week lateral moves, and BAC has also turned laterally.

Energy: Back and forth moves continued. SWN broke higher Friday and is interesting. SPN still in a very nice test, but still not moving up. APA is interesting. XOM is over the 200 day SMA as is CVX, the latter with a strong Friday move.

MISC: CMG looks ready to move again. ROKU posted a great move for us.


Stats: +110.32 points (+0.43%) to close at 26026.32

Stats: +62.82 points (+0.83%) to close at 7595.35
Volume: 2.49B (-6.39%)

Up Volume: 1.61B (+330M)
Down Volume: 857.81M (-482.19M)

A/D and Hi/Lo: Advancers led 1.86 to 1
Previous Session: Decliners led 1.4 to 1

New Highs: 108 (+33)
New Lows: 30 (-5)

Stats: +19.20 points (+0.69%) to close at 2803.69
NYSE Volume: 948.485M (-24.82%)

Up Volume: 587.177M (-4.389B)
Down Volume: 341.199M (-402.682M)

A/D and Hi/Lo: Advancers led 1.82 to 1
Previous Session: Decliners led 1.19 to 1

New Highs: 134 (+5)
New Lows: 13 (-2)


VIX: 13.57; -1.21
VXN: 16.12; -1.05
VXO: 12.88; -1.63

Put/Call Ratio (CBOE): 0.91; -0.05

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: 2.759% versus 2.717%. Bonds continue to fall with yields continuing to rise, helping steepen the curve.

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

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: 1.13650 versus 1.13725. Still in the 5 month lateral trading range.

Historical: 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: 111.921 versus 111.433. Dollar breaking higher over the 200 day SMA after a very strong Thursday took it to that level.

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

111.433 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: 55.80, -1.42. Oil continues working laterally over 55, but it also continues the slow trend higher off the December low.

Gold: 1299.20, -16.90. Gold plunges to the 50 day MA as this inflation measure falls sharply along with bonds.


The stage is set. The indices tested the top of the range -- on top of a 20%ish rally from the December low -- faded just a few sessions, then started a rebound Friday as new money for a new month flowed in. The market remains at the inflection point and will either breakout or move back down to varying degrees.

For now, no sellers have emerged. Indeed, many sectors are producing some good patterns and some good moves upside. The bias for now with the patterns and the ongoing move is obviously upside. Without sellers it is hard for the market to fall. The buyers can slack off, pull their bids and wait for a better entry, but that is not selling. That is just a pause to set up more upside. Thus far, that is what last week looks like.

With that picture we have several more very solid upside plays at various levels of their moves. All are in position to make us good money. Thus, if the indices can continue the Friday move we will look at more positions and see if they can force an index breakout.

Have a great weekend!

End part 1 of 3
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