Monday, April 01, 2019

The Daily, Part 1, 4-1-19

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4/1/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: None issued
Entry alerts: HUYA; MCHP; ODFL; QRVO; VMW
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.


- New quarter, new money.
- China totally believable with its suddenly expansionary PMI.
- US data continues mixed.
- SP500 breaks to a higher recovery high as does DJ30
- New areas get some new money as older leaders continue to rally.
- Near term looks upside, 2018 top still in place.

A 'private' Chinese data company released its China PMI and lo, it surprised with a pop to 50.5 from the prior 49.2 and expectations of yet another sub-50 read. How awesome can that be? Oh, an April Fool's joke? In reality likely, but it appears the unbiased Chinese company was serious. The US tariffs are still in place and hammering the Chinese economy, China and the US are head to head in trade deal negotiations, and China's PMI surprised upside. Who on earth would have seen that coming? And only markets starved to latch onto a reason to move higher would use this 'data' to rally. Hence, a gap and upside rally.

SP500 32.79, 1.16%
NASDAQ 99.59, 1.29%
DJ30 329.74, 1.27%
SP400 1.38%
RUTX 1.06%
SOX 2.49%
NASDAQ 100 1.35%

VOLUME: NYSE -23%, NASDAQ -4%. NYSE trade immediately back below average after the one-day, end of quarter, get in on the upside action Friday. NASDAQ trade backed down a bit to near average.

ADVANCE/DECLINE: NYSE 3.2:1, NASDAQ 2.1:1. Very decent numbers on NYSE, particularly with RUTX lagging the market move. NASDAQ numbers passable, but not commensurate with a 1.27% gain.

Never mind the still tumbling European PMI data turning in lower and lower readings as they remain in contraction. Never mind US February retail sales that flipped negative, undercutting the rather modest upside expectations and turning over on some quite solid January readings.

Retail Sales, Feb: -0.2 vs 0.2 expected vs 0.7 Jan (from 0.2)
Ex-Autos -0.4 vs 0.3 vs 1.4 (from 0.9)

No, China showed strength. How do we know? Because a communist government that lives by propaganda and is facing a life or death trade negotiation and needing to get some 'hand' in the negotiations said it was now expanding. That's like Hitler saying Poland was enough, Bush I saying 'no new taxes,' Obama saying you could keep your existing healthcare, Trump saying . . . do I really need to list them all?

The US was not to be outdone, however, posting a 55.3 ISM, beating expectations of 54.1 and topping February's 54.2. A dog dare, followed by a double dog dare. Will someone go for the triple dog dare (from 'A Christmas Story')?

Perhaps. The US also reported February Construction at 1.0 versus -0.3 expected with January revised sharply higher (2.5% versus 1.3%). Impressive.

Suffice it to say, the US data remains back and forth. After appearing to solidify it has relapsed into hit or miss. Not tanking kind of missing, but still tentative given the Fed hiked into a slowdown, has indeed ceased and is desisting, but has not cut to ease what it tightened to help out. And thanks Kudlow for chiming in on a 'needed' 50BP cut -- just force the Fed NOT to act why don't you? Oh well, it is done.

New quarter, new money.

Did the market care? Yes, but not today. Why? Because new money wanted to get into a rallying market. Just had the best first quarter in years, and after money flowed out to bond funds the prior months, it started flowing back into equities.

Thus, as SP500 and NASDAQ gapped higher and rallied off a test of the break from the top of the resistance range you had new money chasing it. They did what was needed to hold on and indeed advance the upside move, but in the bigger picture just keep in mind that retail money often is late to a move. Near term the indices are breaking higher and we definitely play that.

For the shorter term that is a good upside indication. We play it, make money on it with new plays and letting existing positions run. How stocks react after the new money injection is the key. There may be a quick test to fill the Monday new money gaps, maybe after a bit more upside Tuesday. Then the market likely resumes if the money is going to stay.

New areas?

Remember, during the recent malaise, the issue was not the rise of sellers, just the lack of buyers. Monday buyers showed up in many leaders and new money moved into other areas such as some energy, transports, some materials, machinery/manufacturing.

Always good for a rally to have money move elsewhere, and the thing Monday was money mostly stayed in what has worked as new money was pushed to new areas. That is good rotation.

Not all was perfect. CMG lost a bit of ground though volume is still light. One analyst notes AMT, also in a torrid run, reversed Monday from a higher high on very strong volume. INTC rallied 1.5%, but low volume persists. GOOG up nicely but on low volume. FB low volume. Lots of sympathy moves upside that did not have a lot of support. AMZN, AAPL, NFLX showed stronger trade, so not all names rallied on nothing. Again, there is some money being allocated and most moved higher. Will the new areas keep getting money to the detriment of the names that led thus far, or will all continue to enjoy some upside? That is what will reveal more as the first of the new quarter new money dissipates.


Taking the next step toward challenging for new highs. SP500 at a higher recovery high as is DJ30. NASDAQ is solid but below the recent recovery high. SOX very similar to NASDAQ. Definitely on the upside move again with new money entering the market to start the new quarter. If the money continues moving in and there is little selling from rotation, new highs are possible.

Still, some respected analysts are calling for a major market top. I have not abandoned that premise; the same pattern is still present as before, i.e. a topping pattern spanning 2018 and still in place. This current rally is challenging that top but has a lot of work to do in order to take it out. One step at a time and we play that move.


SP500: Gaps upside then moves past the prior recovery high from two Thursdays back. Good volume Friday on the upside move, but that was quarter end so discounting it some. Volume weaker but not terrible Monday. A very credible move higher after a test of the break through the Oct/Dec resistance range.

NASDAQ: Gapped upside and rallied as well, but could not take out the high from 2 Thursdays before. Roughly 10 points off, not a bad move, but volume did fade some on the move. If you want to credit the Friday end of quarter volume as showing true buying, okay, then NASDAQ showed some decent buy side volume. 7940 - 7050 is next resistance, but that is all rather jumbled together and of course, NASDAQ has not moved past the recovery high yet.

DJ30: Gapped and rallied to the middle resistance peak in the Oct/Dec range, closing just over the February recovery peak at that time. This is a new recovery high territory as DJ30 tries to skip any further consolidation work and go directly to a breakout. Getting assistance from many areas that were more or less dormant -- financial, energy, manufacturing, materials.

SOX: Big gap through the bottom of the resistance range puts it still below the highs from 2 weeks back, but a solid gap. New money likes chips.

SP400: Gapped over the 200 day SMA and rallied to close over the top of the Oct/Dec resistance range. That 61% Fibonacci retracement double bottom (also at the 50 day MA) is trying to leverage an upside breakout move similar to DJ30, bypassing more consolidation in a right shoulder. For now. For the start of a new quarter with money being pushed in.

RUTX: Gapped over the 20 day MA and toward the March mid-month highs. Still in a recovery mode and below prior areas, but a decent ABCD bounce. New high off this? Certainly lagging the other indices, has farther to go and likely consolidates some after a rally near the February high.


Transports: Continued the improvement from last week and we picked up some ODFL positions. The rails jumped higher (KSU, CSX, NSC) and on a test we will look at some of those. Airlines were up, but they are not leading the group.

FAANG: GOOG jumped off its trendline test though volume was so-so. FB up though no volume at all. AMZN gapped and rallied on a nice volume boost. AAPL up on volume, just edging past the 200 day SMA. NFLX showed good trade as it moved up off the 50 day MA's. Some decent moves.

Manufacturing/Machinery: CAT gapped over the 200 day SMA, CMI gapped higher and rallied to a new recovery high. UTX gapped on top of the Friday upside gap; got away from us for now. We will be looking at these as they test this initial breakout.

Semiconductor: Leaders moving more, e.g. AVGO, TSM. LRCX gapped nicely, MCHP gapped and surged on good volume. AMAT did the same on good volume. AMD still trying. NVDA is not bad but is not taking off as no volume is running in. INTC gapped and rallied but on low trade and is bumping the prior highs.

China: Chinese PMI pumped these up. HTHT surged for us and HUYA posted a good move. JD solid and even BIDU gapped over the 50 day MA's, perhaps showing some life.

Software: Not real participants. Did not sell off but did not advance the ball as a group. There are of course some making their own wake, e.g. VMW. FFIV gapped over the 50 day MA's. The game software stocks look decent.

Financial: Another head fake upside? V moved higher as did MA. GS moved upside but the pattern is blah. Banks surged outside of WFC; perhaps they can mend their patterns.

Energy: Big names edging higher, e.g. XOM, CVX. Offshore drillers interesting, particularly DO.

MISC: CMG gapped higher, faded some, above average volume. Worth watching out for. SQ setting up but not breaking out.


Stats: +329.74 points (+1.27%) to close at 26258.42

Stats: +99.59 points (+1.29%) to close at 7828.91
Volume: 2.22B (-3.9%)

Up Volume: 1.62B (+40M)
Down Volume: 577.6M (-123.18M)

A/D and Hi/Lo: Advancers led 2.1 to 1
Previous Session: Advancers led 1.4 to 1

New Highs: 108 (+30)
New Lows: 34 (-14)

Stats: +32.79 points (+1.16%) to close at 2867.19
NYSE Volume: 833.842M (-23.01%)

Up Volume: 645.458M (-58.321M)
Down Volume: 178.83M (-176.447M)

A/D and Hi/Lo: Advancers led 3.16 to 1
Previous Session: Advancers led 1.6 to 1

New Highs: 177 (+39)
New Lows: 12 (-13)


VIX: 13.40; -0.31
VXN: 16.31; -0.31
VXO: 13.40; -0.62

Put/Call Ratio (CBOE): 0.84; -0.04

Bulls and Bears:

Very status quo after the big recovery. Both bulls, bears holding position.

Bulls: 52.0 versus 53.9

Bears: 20.6 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: 52.0 versus 53.9
53.9 versus 52.4 versus 52.9 versus 52.4 versus 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

Bears: 20.6 versus 20.6
20.6 versus 21.4 versus 20.6 versus 20.4 versus 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



Bonds rallied again as yields dropped again. Investor's Business Daily sports a good article this weekend about whether the 3 month/10 year inversion meant anything. It appears to acknowledge that pair can indicate recession, but also notes that other recessions had other inversions as well, not just that pair. Moreover, it discusses WHY we have this inversion and how its genesis differs from those in other recessions, e.g. this one is caused by the FOMC backing off rate hikes while the others were a result of the Fed continuing with rate hikes. Interesting reading and answers some of the questions we have had regarding how solid the leaders and their patterns look, how good copper and oil look, even as there was a short inversion of the 3 month/10 year instruments.

The 3 month yield still back below the 10 year: 2.424% versus 2.496% and the spread is widening some.

The 2 year is still below 10 year: 17BP spread, expanding 3 BP

10 year: 2.496% versus 2.381%

3 month: 2.424% versus 2.403%
2 year: 2.325% versus 2.266%

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

2.381% versus 2.281% versus 2.421% versus 2.443% versus 2.437% versus 2.538% versus 2.524% versus 2.616% versus 2.601% versus 2.591% versus 2.628% versus 2.625% versus 2.60% versus 2.641% versus 2.632% versus 2.641% versus 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%

EUR/USD: 1.12058 versus 1.12178. Euro back to the early March lows.

Historical: 1.12178 versus 1.12310 versus 1.12452 versus 1.12754 versus 1.13145 versus 1.13009 versus 1.13713 versus 1.14314 versus 1.13526 versus 1.13359 versus 1.13248 versus 1.13070 versus 1.13271 versus 1.12895 versus 1.12592 versus 1.12344 versus 1.1191 versus 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

USD/JPY: 111.43 versus 110.867. Back up to the 200 day SMA where it failed mid-March.

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

110.867 versus 110.816 versus 110.132 versus 110.537 versus 110.113 versus 109.92 versus 110.72 versus 110.673 versus 111.374 versus 111.432 versus 111.470 versus 111.715 versus 111.314 versus 111.428 versus 111.165 versus 111.482 versus 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

Oil: 61.59, +1.45. Rallied to the 200 day SMA. 60.14, +0.84. Still moving laterally over the 10 day EMA and below the 200 day SMA. Measuring that resistance.

Gold: 1294.20, -4.30. Gold throws a second doji below the 50 day MEA after flopping below it Thursday. Looks as if it wants to sell off.1


The new quarter brought in new money and pushed it into some of the same areas as well as some groups that started to perform late last week, e.g. transports, machinery, manufacturing. Energy, financial also received some money. At the same time, some of those same leaders moved higher, leaders that were testing or were starting back upside already.

The trick is whether they can continue the move after the new money. Good breaks higher by key indices and good stocks. This move may be tested but the initial action is good with some breadth on NYSE, decent-ish volume, and plenty of good moves.

We picked up some of those moves and we let our existing plays continue. Some plays we wanted got away with gaps, but they will test, and if the move holds, they will provide opportunities.

Bigger picture the indices have not shaken off the 2018 and early 2019 range, but they are working on it. That remains the big overhang for the entire market, but as the first session of the new quarter showed, money is still coming in and ready to push stocks higher near term. Of course, we will play those near term plays that may turn into longer term plays, taking what the market gives.

Have a great evening!

End part 1
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