Tuesday, April 23, 2019

The Daily, Part 1, 4-23-19

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4/23/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: UTX; VMW
Entry alerts: AXSM; FSLR; NFLX; NTES; TCBI
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.


- More indices making a run at new highs.
- FAANG stocks continue upside while others test: rotation continues to work.
- Sentiment ebullient, nearer term not necessarily: overall a solid setup, plenty of leadership, still a bit cautious of sellers entering again.

Hark -- new closing highs on NASDAQ and SP500. Could not quite break over the all-time highs on the close but definitely rubbing them.

SOX moved to another higher closing high while NASDAQ 100 surged to a new all-time high, closing and intraday.

DJ30 broke over the January 2018 high and is now eyeing the September penultimate high and the October all-time high, just over 25 points higher.

SP400 midcaps bounced off the pullback from that prior Wednesday harder drop, rallying to close near the high and put in a higher closing high for this recovery. RUTX not so notable, rising to just below last week's highs, and those are quite a ways off from the RUTX' all-time high.

It was good to see all indices moving higher in decent chunks versus the very selective moves prior to Tuesday. Indeed, the small caps led in percentage terms, trying to make up some lost ground along with SP400.

To view, click on the following links:


SP500 25.71, 0.88%
NASDAQ 105.55, 1.32%
DJ30 145.34, 0.55%
SP400 1.27%
RUTX 1.61%
SOX 1.01%
NASDAQ 100 1.26%

VOLUME: NYSE +14%, NASDAQ +17%. Nice jumps in trade, but alas, still remained below average on both NYSE and NASDAQ. Good to see volume rise, but it was not breakout blowout kind of trade.

ADVANCE/DECLINE: NYSE 3:1, NASDAQ 2.8:1. Very credible breadth what with the small caps and midcaps throwing in on the upside.


Monday may have been FAANG day, but Tuesday, well, it was also FAANG day. And other large cap tech day, e.g. big software such as MSFT, VMW. Some industrials tried their hand with UTX and HON surging, though many continued to test.

Financials saw some small issues surge, e.g. TCBI, while large names mostly continue what are some really good tests: C, MS, JPM.

Transports are also still in pretty good tests on both the rail and flight side, along with some other truckers.

Chips are still in a rest mode for many after some very solid moves. Afterhours TXN beat and was up, but then, alas, was not. Overall still very solid, just a breather.

You can see leadership is still present, just some rotation around the market as some stocks test good moves while others that just came back to life, e.g. FAANG, post strong upside moves. That is a sign of a pretty healthy market.

The Lay of the Land

So, indices are bumping and breaking the old highs. Small and midcaps caught new bids a couple of sessions after the FAANG started to catch serious bids. Chips, transports, manufacturing -- all recent leaders -- taking a bit of a breather. Leadership still solid, indices at resistance.

Then the sentiment. The bulls are not surging into the 60's, though after this week they could possible do that. The sixties have marked 'caution some selling is coming' areas ever since 2009. Not immediate, but it sets the table.

No I am talking about the softer side of an already soft pseudo-science.

You have the bipolar Cramer in his effusive, talking twice as fast as his usual fast talk, talking about the shorts having to cover and that is propelling stocks higher, particularly the likes of HAS, KSS and other left for dead areas.

Then you have the 'Fast Money' types who are feeling the exuberance and are ready to fade the current move.

Oh, and throw in Businessweek's cover querying whether inflation is dead. That is not directly market tied, but if a magazine of note puts something on its cover, the other is on the way, i.e. inflation.

As for the dueling shows, it typically goes like this: Cramer is typically right longer term as he represents the big money manager side and how they respond to market events (though the algos have altered the speed and sigma of the moves). The traders are typically correct short term overall as opposed to individual stocks.

Thus, the resolution is you have a near term pullback to reset and then take on the highs anew. That makes sense given the good runs to this point, some areas now a bit extended with most leadership groups up 2 to 4 weeks without much rest. Of course there are exceptions with areas we noted already resting: chips, manufacturing, financials -- they can still move up while the indices overall test back to reset as some of the mega names that have surged (e.g. FAANG, MSFT) test back after their solid moves.

Summary: So you have indices bumping resistance. Some leaders flying while others are testing, setting up a nice ongoing rotation. You have market ebullience and some near term caution.

Even with some very cheery outlooks, this scenario is solid. Nothing it THAT extreme to indicate an imminent rollover. Yes there can be testing in the recent leaders, but there are also very good patterns already testing awaiting the nod to head back upside.

Thus, even if the indices fade off these highs and stocks test, unless the sellers show up in force at the prior Wednesday or in reality even stronger, not much is undermining the move. Don't want to sound all rosy and gushy, but at this juncture that is the setup. Sellers can always storm the palace gates, and there were some sellers a week ago, but they will have to show they can do the deed, something they have failed at miserably for as long as some people have claimed to be expert in the market.

Accordingly, we are a little cautious with some positions near term. We have already banked some solid gain on many positions and continue doing so, booking some UTX and VMW today. There are May option contracts out there on some big movers such as GOOG, LRCX, MSFT, NVDA, V that we should consider banking at least some more of if those areas start to stammer a bit. Then, we let some of these big movers come back some to set up again, but as they do we likely see financials, machinery/manufacturing, chips, transports make new breaks higher and provide entries.

Perhaps it won't be a move that see just some fade while others rise. Perhaps it will be a situation where everything tests a bit then makes a new move. Either way, we take some gain if things stumble and then move in if they hold the line. And take some gain on the May options when a move stalls.

Have a great evening!


Stats: +145.34 points (+0.55%) to close at 26656.39

Stats: +105.56 points (+1.32%) to close at 8120.82
Volume: 2.08B (+16.85%)

Up Volume: 1.54B (+615.01M)
Down Volume: 495.99M (-326.63M)

A/D and Hi/Lo: Advancers led 2.83 to 1
Previous Session: Decliners led 1.34 to 1

New Highs: 102 (+52)
New Lows: 52 (-20)

Stats: +25.71 points (+0.88%) to close at 2933.68
NYSE Volume: 819.964M (+13.51%)

Up Volume: 597.222M (+281.378M)
Down Volume: 210.935M (-189.154M)

A/D and Hi/Lo: Advancers led 2.97 to 1
Previous Session: Decliners led 1.42 to 1

New Highs: 136 (+82)
New Lows: 20 (-14)


VIX: 12.28; -0.14
VXN: 16.15; +0.41
VXO: 11.86; -0.23

Put/Call Ratio (CBOE): 0.81; -0.05

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 drops 5 to 9BP

The 2 year versus the 10 year: Spread climbs 1BP to 21BP

10 year: 2.57% versus 2.587%

3 month: 2.481% versus 2.441%
2 year: 2.36% versus 2.387%

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: 1.12214 versus 1.12593. Euro drops hard but . . . is still in the recent range, just off the lows.

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: 111.843 versus 111.942. Still flat, flat, flat 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: 66.30, +0.75. Continuing the Monday break higher.

Gold: 1273.20, -4.40. Sliding toward the 200 day SMA as a resolution to the late January to March head and shoulders.

End part 1
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