Monday, April 22, 2019

The Daily, Part 1, 4-22-19

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4/22/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: AAPL
Entry alerts: BZUN, MTCH; MTDR; PTEN
Trailing stops: None issued
Stop alerts: None issued

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- Market starts soft, mostly recovers as FAANG decides to lead.
- Energy, China stocks rally as well while rails, machinery, financials rest.
- While the market again shows leaders, the internals are at best weak and the old tops and 2018 highs are still there.
- Economic data is bad enough to star the week to keep the Fed away.
- Have to watch for sellers but the leaders that are leading are leading well.

You could call today the FAANG rally and you would be pretty much dead on. Those stocks all posted solid advances. Sure other areas posted some gains, e.g. some other large techs, some China stocks, and of course energy (with the end to Iranian oil waivers). It was not a one-horse show. It was just a few horses, however.

SP500 2.94, 0.10%
NASDAQ 17.21, 0.22%
DJ30 -48.49, -0.18%
SP400 -0.37%
RUTX -0.36%
SOX 0.01%
NASDAQ 100 0.31%

VOLUME: NYSE -14%, NASDAQ -16%. After volume moved above average Wednesday on some sellers entering, volume has really become tame, moving back below average.

ADVANCE/DECLINE: NYSE -1.4:1, NASDAQ -1.4:1. Not a strong showing even as some big names led. That said, FB, AMZN, NFLX showed excellent trade as they rallied as did many energy stocks.


Once again leaders advanced, acting as leaders, posting solid breaks upside and solid volume. Again, many of those were in FAANG, energy, China.

Other stocks that led into last week took quite nice rests: rails, airlines (even with jumping oil prices), manufacturing, machinery -- even financial. Some quality stocks in good sectors took a breather, and that is okay.


The overlay, however, is the indices still dealing with the old highs and that long 2018 into 2019 range after a four week move higher to that level. That can put a bit of a drag on the upside, at least near term.

Thanks to the early week success of FAANG, NASDAQ 100 broke back up to a new high and logged a new closing high. SOX is testing off its recent surge but is sitting quite comfortable.

The other large cap indices are close.

DJ30 is still bumping the January 2018 peak, the 'in the hole' level (using a baseball analogy) just below the September 'on deck' high followed by the October high.

NASDAQ is struggling to follow NASDAQ 100, but it is eyeing the August and October 2018 highs.

SP500 continues bumping the August 2018 peak, its 'in the hole' level similar to DJ30, with the September and early October twin highs marking the prior all-time highs.

SP400 and RUTX looked better even though they were lower, trying to hold on and shake off that Wednesday higher volume reversal. For now they are doing that; not leading but hanging on and for now willing to follow.


Stats: -48.49 points (-0.18%) to close at 26511.05

Stats: +17.21 points (+0.22%) to close at 8015.27
Volume: 1.78B (-16.04%)

Up Volume: 924.99M (-185.01M)
Down Volume: 822.62M (-156.05M)

A/D and Hi/Lo: Decliners led 1.34 to 1
Previous Session: Decliners led 1.06 to 1

New Highs: 50 (-15)
New Lows: 72 (-9)

Stats: +2.94 points (+0.10%) to close at 2907.97
NYSE Volume: 722.401M (-13.36%)

Up Volume: 315.845M (-95.734M)
Down Volume: 400.089M (+1.386M)

A/D and Hi/Lo: Decliners led 1.42 to 1
Previous Session: Decliners led 1.04 to 1

New Highs: 54 (-17)
New Lows: 34 (+7)


VIX: 12.42; +0.33
VXN: 15.74; +0.59
VXO: 12.09; +0.05

Put/Call Ratio (CBOE): 0.86; -0.02

Bulls and Bears:

At this juncture there are no extremes in this indicator. It did its work in the late 2018 selling with a crossover of the bulls and bears, and when that occurs you expect a recovery. That has been the case. Now with the indices bumping resistance you look for extremes, but bulls are not hitting that 60ish level that has prompted selling/corrections in this long rally from 2009.

Indicator level: green (all is well), but rising toward the 60's that would start to represent a threat (a yellow indicator).

Bulls: 54.8 versus 53.9

Bears: 19.2 versus 19.2

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.



Threat level: Yellow. No current inversion. One prior inversion of 3 month/10 year but it was just 2 days. Curve is flat at the short end but still upward sloping.

The 3 month yield versus the 10 year: Spread jumps back up 7BP, now again at 14BP

The 2 year versus the 10 year: Spread climbs 2BP to 20BP

10 year: 2.587% versus 2.56%

3 month: 2.441% versus 2.49%
2 year: 2.387% versus 2.38%

Historical: the last sub-2% rate was in November 2016 (1.867%). Last trade over 3% was November 2018. 2.6% for quite some time, then yields started higher, first run from November to January, then mid-March.

EUR/USD: 1.12593 versus 1.12459. Euro jumped back up after dropping hard last week.

Historical: 1.12 to 1.13 for the past 6 months as the pair trades in a range after the euro sold off from the early 2018 peaks.

USD/JPY: 111.942 versus 111.92. Dollar continues moving laterally in a very tight range over the 200 day SMA.

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

Oil: 65.55, +1.48. Broke higher out of the two week range over the 200 day SMA. Nice move. Still serious resistance from here to 74.

Gold: 1277.60, +1.60. Doji at the upper trendline of the big triangle it broke from in late January. Obviously an important level.


Just when you think the old economic data is firming up and the Fed may be back on the warpath again, the economy throws out some barking dogs. Last week Housing Starts missed big (-0.3% versus +4.1% expected) and Monday March Existing Home Sales missed large again: -4.9% when -3.8% was expected, -5.4% year/year. March is the thirteenth straight monthly decline. Housing is pretty key to the economy; a lot of other areas flow from the housing market. Including rate hikes. Go figure.

It would thus appear the Fed is still on hold. Particularly if China's dictators were serious about taking the "foot off the accelerator" with respect to the recent credit flooding, though, of course, careful not to "step hard on the brake." Might get whiplash.

So, some indices at new highs, most others sitting on a 4 week move wondering if they could break through. Some quality stocks ripped higher again, most did not, but the market has continued to move as it finds new groups to take the lead. As noted, Monday once more it was FAANG stocks driving the show with supporting roles from energy and China.

We picked up more positions though we already have several on FAANG so we stepped up to energy, a bit of China, and even MTCH.

That said, still looking at some downside setups that look quite interesting -- they will become more so if the tops hold and send stocks back downside. Or even if that is not the case: biotech is not lighting it upside, and software stocks continue problematic trade.

Of course this all speaks to the stock market at resistance and needing a resolution. After four weeks upside -- though just two weeks for some such as FAANG -- that resistance and gravity from the move higher do play a factor in continued upside.

That makes this level interesting, but just as interesting are the great patterns in good stocks that continue to move higher. They are not treading with fear regarding the old highs so we continue moving into some upside to play those moves even as we watch for rollovers from groups that rallied and act tired.

Have a great evening!

End part 1
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