Wednesday, April 24, 2019

The Daily, Part 1, 4-24-19

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4/24/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: FB; MSFT
Entry alerts: MS; CMG
Trailing stops: None issued
Stop alerts: SNAP

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- Nervous trade ahead of key afterhours earnings stymies large cap advance.
- Indices try new highs, fade the gains. Most indices faded the gains.
- No heavy selling, just lighter volume as bids were idled ahead of earnings results.
- FB, MSFT afterhours earnings help stocks recover the pre-close losses, setting up an upside Thursday with new attempts on new highs.

The stock indices continue to trade around the old highs, some breaking through, others trying but not quite there, while others continue rising to take their shot as well. Wednesday they tried higher again though with major earnings after the close the early rather modest upside was pushed back by the close. The result was a mixed close. The large cap indices traded lower ahead of key earnings while RUTX and SP400 played catch up, managing some rather mediocre upside.

SP500 -6.43, -0.22%
NASDAQ -18.18, -0.23%
DJ 30 -59.34, -0.23%
SP400 0.35%
RUTX 0.19%
SOX 0.95%
NASDAQ 100 -0.34%

VOLUME: NYSE -2%, NASDAQ -2%. A modest reduction in trade as the large cap indices faded slightly. No selling, just nervous trade that saw bids dry up.

ADVANCE/DECLINE: NYSE flat; NASDAQ -1.1:1. Ho hum. Matched the rather flat indices, up or down.

Once again NASDAQ traded at a new high just to backpedal and close below those highs. SP500 again came close but no cigar. DJ30 tried farther over the January 2018 high but then backtracked to close below that level.

SOX, SP400 and RUTX did a better job of holding onto some gains -- they actually closed positive -- but even those indices closed well off their intraday highs. That said, it is notable that SP400 put in a new recovery high and held onto it. RUTX put in a higher recovery high as well, hung onto some of it for a slightly higher recovery close.

NASDAQ 100 backtracked off its Tuesday high ahead of those major earnings announcements from FB, MSFT, TSLA, V, CMG, XLNX (yes, some others not in NASDAQ 100, but they are having afterhours impact). FB is up 12+ clicks afterhours and that is taking up other 'social' stocks such as GOOG (+11 afterhours), though AAPL is flat.

It is not all afterhours glory. MSFT, V, CMG beat as well, and while MSFT trades higher, V initially traded lower before recovering some lost ground while CMG is flat. XLNX beat on revenues (+23.1%) but rather strangely missed on the bottom line. It is getting pounded afterhours and is acting as a drag on some semis such as AVGO, INTC afterhours.

TSLA was almost an hour late in releasing its earnings. A dramatic piece of showmanship by Musk? No! It was the same as a school kid who did not do his homework and was scrambling at the last minute to throw something together (kind of like Tesla cars of late?). The miss was shockingly bad: -2.90/share vs -0.69 expected. Revenues 4.54B versus 5.19B expected. But . . . the company confirmed it will reach its production goals. Whew, I was worried about that. At this stage of the game, with such horrid metrics, stating you will reach your production goals is the same as a school giving a beleaguered head football coach a 'vote of confidence.' In short, get your resume in order.

As for the overall afterhours trade, SPY traded lower initially -- after diving downside in the last 10 minutes of regular session trade on those earnings nerves -- but has recovered to a modest gain.

Ah, the market showing resilience yet again. Able to be scared or harbor doubts about the economy and earnings, but also able to look on the bright side when fears are somewhat allayed. Falling upwards as I have said before.

One of the big tells will be the semiconductors. TXN managed to surge Wednesday after a down afterhours and pre-market on its results. INTC, AVGO, TSM, LRCX, SWKS, QRVO continue performing even if recently in test mode, and many tried to move higher Wednesday. Several closed well off the intraday highs, unable to hold most of the session move. Will they be able to resume the upside from these rather solid setups? They tried Wednesday, but not all were ready. A very important group that led the stock market to the new highs, now in a good test, in position to move. Will it?

With some of the afterhours indications in the wake of MSFT and FB -- and the lack of destruction of CMG and V and even TSLA after is impressive miss is down just 2.5 clicks -- it appears Thursday will be at least initially an earnings relief move higher.


M&A: OXY upped the ante on CVX, making a $76 bid for APC, shaming CVX' $65 bid. Thus, for a second time in two weeks APC gapped higher. At least things are more interesting for the shareholders, but who knows if any deal closes?

BA: It is serious for BA. Today it pulled its share purchase program and its 2019 guidance due to 737 Max issues. At least the stock remains in its 7 week range after that sharp gap lower early March.

Trade: The US is sending a 'high level' delegation to China next week to talk more trade. Ah yes, hope springs eternal the communists will agree to something they cannot agree to. Do you see the pattern here? Since February Xi is the one playing it aloof, apparently not tied to a deal: trying to play the Trump card on Trump.

China: Supposedly there are 'clear signals' China is scaling back its massive stimulus, as if anything that is news can be a 'clear signal' in a communist regime. There is a modest pause in the Shanghai stock rally. Just a pause. And modest.


It looked as if the indices might run into some near term issues at the prior highs. After a 4-week rally to those highs or near them, some concern ahead of results. Bids were pulled ahead of them just in case, some profits banked.

Any pullback, however, looks to have been shelved in favor of Zuckerberg's hollow promises of privacy that everyone heralds but no one believes. People delude themselves into believing steps are being taken, that they and their data is safe. They go on posting their coffee preferences, bathroom habits, aunt Martha's recipe for never fail cornbread, secure in the belief everyone is enveloped in a bubble of invisibility.

But, that is their issue. The market loves big earnings beats and potential FCC settlements that are in the $3B to $5B range versus higher.

SPY are higher late after initially dropping. Recoveries from V, CMG, and TSLA are augmenting the surges from FB and MSFT. There is also a coattail effect pushing others higher.

Chips will be a key as noted earlier. After a pullback some jumped higher, e.g. TXN, but XLNX afterhours -- Cramer's NVDA replacement -- is getting the treatment NVDA received in late 2018 when its results disappointed. Chips are important, and while a lot of areas are happy, we will see if they participate Thursday.

Still solid pullbacks in financials, transports testing, manufacturing as well. Machinery took some punches as CAT's earnings dropped it to the 50 day MA, DE faded to the 10 day EMA; CMI is holding up well.

Still trying the old highs, refusing to back down. Stocks still showing leaders, some rallying, some already rested and tested. We will see if the afterhours excitement on earnings coming in better than expected rallies the troops and leads to new highs that hold. The bias of the market suggests that is more likely than say a reversal.

Have a great evening!


Stats: -59.34 points (-0.22%) to close at 26597.05

Stats: -18.81 points (-0.23%) to close at 8102.01
Volume: 2.04B (-1.92%)

Up Volume: 1.04B (-500M)
Down Volume: 981.88M (+485.89M)

A/D and Hi/Lo: Decliners led 1.09 to 1
Previous Session: Advancers led 2.83 to 1

New Highs: 128 (+26)
New Lows: 45 (-7)

Stats: -6.43 points (-0.22%) to close at 2927.25
NYSE Volume: 801.225M (-2.29%)

Up Volume: 323.951M (-273.272M)
Down Volume: 466.609M (+255.674M)

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

New Highs: 130 (-6)
New Lows: 27 (+7)


VIX: 13.14; +0.86
VXN: 16.67; +0.52
VXO: 12.66; +0.80

Put/Call Ratio (CBOE): 0.87; +0.06

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 holds at 9BP

The 2 year versus the 10 year: Spread falls 1BP to 20BP

10 year: 2.522% versus 2.57%. Bonds rallied with TLT gapping up off the 50 day MA test.

3 month: 2.437% versus 2.481%
2 year: 2.32% versus 2.36%

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: 1.11538 versus 1.12214. Euro bombs lower, undercutting the March and November 2018 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. Okay -- starting to break below the range of the past 6 months.

USD/JPY: 112.144 vs 111.843. Dollar breaking higher from the 2 week tight range . . .

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: 65.89, -0.41. After a good surge, oil paused as inventories showed a much larger than expected build.

Gold: 1279.40, +6.20. Trying to bounce off the drop to the upper trendline of the triangle pattern. Broke from it in late January and has not been able to do much with it since, now back to the breakout point. If the economy is working, inflation tame, then gold's fade makes sense.

End part 1
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