Thursday, April 11, 2019

The Daily, Part 1 of 2, 4-11-19

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4/11/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: None issued
Entry alerts: AVGO
Trailing stops: None issued
Stop alerts: None issued

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The REPORT SCHEDULE is as follows:

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.

Access to all current videos will remain assessable each day using the play links in the reports.

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.


- After a promising Wednesday, a malaise strikes most sectors.
- Bias remains upside but the analyst bias is more and more toppish.
- Earnings season starts Friday morning with JPM, WFC and other banks.
- Earnings surprises could allow the market to finish the rise to the prior highs, offering opportunity for more upside gains. But, know that the move could end or at least stall significantly when there.

The word for the day: lethargy. Whereas Wednesday showed some upside possibilities with growth leading, particularly the small and midcaps, Thursday was sloppy. No move had staying power. The indices were unable to do anything with the solid midweek performances, closing mixed and the leader putting in all of 0.27% to the upside.

While the bias may be upside and stocks are 'falling forward' overall, of late whether a move holds or not is a day to day decision. The consolidations -- with most indices moving laterally in a narrow range -- are not bad, but they are going to have to put something on the board before too long or the move loses momentum and tests back more.

SP500 0.11, FLAT
NASDAQ -16.88, -0.21%
DJ30 -14.11, -0.05%
SP400 0.27%
RUTX -0.15%
SOX -0.07%
NASDAQ 100 -0.22%

VOLUME: NYSE -6%, NASDAQ -2%. Still easily below average on both exchanges, not a bad thing given the indecision and going nowhere on the session.

ADVANCE/DECLINE: NYSE +1.2:1, NASDAQ -1.2:1. Mirrored the indices, and on a day such as today, not a bad thing.

More downgrades today. AAPL lowered by Credit Suisse because CS believes iPhone sales will drop double digits. CMG, KDP, WM, LLY all downgraded.

Monday was also a major downgrade day with stocks downgraded across all sectors.

In addition, more pundits are pointing out the potential for a market top given the 2018 range, obviously looking at 2900 to 2950, the last of the range standing in the way of new highs. As the indices work laterally for a week after the last leg higher, more pundits are calling for a top near this level. Makes sense to make note of that, no doubt about it. Exactly what we have done all along.

You see what is happening, right? Lots of hedging in the event earnings disappoint already lowered expectations right below major resistance. Could be a self-fulfilling prophecy, could see the slowing upside turn to actual selling. Of course, when everyone expects the market to do something, it often gives you a surprise. What is logical can hold off occurring, giving you false starts and stops until you give up. Multiply that over the millions in the market; they give up, get worked out of the market, then the longer term holders are left. Can happen.

If there is selling, that is not anything intrinsically bad, it would just be a fact that you are seeing more of this. We play the market. A good move higher, a test in progress, other stocks in great setups. Which way the good setups break tells the story of this consolidation after this last leg upside.

A day such as Thursday only ramps up that rhetoric more. Nonetheless, you are aware of it, you note it. Probabilities for new highs in the next couple of weeks are not greater than 50%. If earnings really surprise upside, then perhaps the odds change.

Thus, you know the resistance, you know there are those who believe this will stop the market. You also know there are quality stocks in quality patterns. How those stocks move is the true tell.

Accordingly, we see how this lateral move plays out. If the stocks break higher we let the current positions move higher and let them build some more gain into the plays. If there is a stall we bank at least some more gain, how much or how drastic we move to protect positions depends upon the aggressiveness of any reversal.


To view, click on the following links:

SP400 midcaps led the session and broke to a higher recovery high, even if it was by a gnat's rear.

SP500 flat below the Monday higher recovery high. Still below the late August penultimate high and of course the all-time high. Lots of resistance and understandable the pundits are nervous. Thus far, however, SP500 is just pausing after its last run, and many SP500 stocks are still in good patterns.

SOX rallied to a higher high then faded to a modest loss, still in the range of the past week. Makes higher highs then fades back. It did break to a new high and it is normal to test the move. Working laterally and holding the gains is a good indication of strength -- thus far.

DJ30 is in a very nice test, a bit of a fade after hitting a higher recovery high to end last week. A doji Friday led to the pullback, but a pair of doji at the 10 day EMA and right on top of the prior highs and actually looks really great in this pullback. MACD did lag on the last high so it will have to show good upside momentum when it makes the upside break.

NASDAQ gapped to a higher recovery high then faded to a loss. Holding over the late July peak for now though the techs looked weak on the session.

RUTX stalled after its market-leading Wednesday move, showing almost identical cation to the prior Friday/Monday combination: a strong move then flat. Will it show the Tuesday tank as well? Rallied to the February high with a break upside off the double bottom. Now forming a handle of sorts just below the November 2018 peak. Okay, it will show if it can breakout or not.


Machinery/Manufacturing: Best group we saw. MMM started upside off its test. UTX not bad, still not a new break higher from the consolidation. CAT jumping off its Tuesday drop. CMI posting a nice move to a higher recovery high.

Financials: Trying to move up, but after higher opens Thursday they lost the bids and faded.

Semiconductors: AVGO was solid enough to enter, and most chips held good patterns, either testing (e.g. TSM), pausing (LRCX, MCHP, QRVO, AMAT, AMD), or breaking modestly higher a la AVGO.

Materials: Well, as soon as you tout CX it drops. That said, VMC, LPX, USCR remain solid. TREX V bottomed mid-March and has moved straight upside.

Energy: Still some very interesting patterns but also waiting for the moves. APC looks great. APA solid. VLO moved up again though gave much back. DNR still solid in a lateral test but CRZO struggling. XOM a bit better today, testing the 20 day EMA then reversing upside.

FAANG: Very sluggish. AAPL had more negative analysts and today could not recover as it did Wednesday. AMZN was flat even as Bezos basically warned it was spending a lot of money and could have billion dollar flops; was that an earnings pre-announcement? FB still very solid after its recent break upside, testing laterally. NFLX showed some strong volume as it tested, moved a bit higher but still in the range. GOOG added just a modest gain as it tries, and doesn't thus far do a convincing job, of moving off the 20 day EMA.

Biotech/Drugs: Suddenly struggled.


Stats: -14.11 points (-0.05%) to close at 26143.05

Stats: -16.88 points (-0.21%) to close at 7947.36
Volume: 1.96B (-2%)

Up Volume: 820.9M (-619.1M)
Down Volume: 1.12B (+586.76M)

A/D and Hi/Lo: Decliners led 1.21 to 1
Previous Session: Advancers led 2.27 to 1

New Highs: 82 (+4)
New Lows: 35 (-8)

Stats: +0.11 points (0.00%) to close at 2888.32
NYSE Volume: 695.267M (-6.26%)

Up Volume: 292.684M (-159.258M)
Down Volume: 3.759B (+3.477B)

A/D and Hi/Lo: Advancers led 1.19 to 1
Previous Session: Advancers led 2.76 to 1

New Highs: 121 (-2)
New Lows: 17 (+7)


VXN: 16.66; -0.10
VXO: 12.78; -0.03

Put/Call Ratio (CBOE): 0.99; +0.10

Bulls and Bears:

After a pause, bulls starting back upside, now near the top of the range for 2019 yet again. Bears falling back again after consolidating for a few months.

Bulls: 53.4 versus 52.0 versus 53.9

Bears: 19.4 versus 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: 53.4 versus 52.0
52.0 versus 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

Bears: 19.4 versus 20.6
20.6 versus 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



The 3 month yield versus the 10 year: Spread expands back to 7BP.

The 2 year versus the 10 year: Spread falls 2 to 14 BP.

10 year: 2.495% versus 2.465%

3 month: 2.431 versus 2.426%
2 year: 2.356% versus 2.327%

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: 1.12618 versus 1.1275

Historical: 1.12 to 1.13 for the past 5 months as the pair trades in a range after the euro sold off from the early 2018 peaks.

USD/JPY: 111.592 versus 111.07. Bounces off the 50 day MA and cracks back up just 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: 63.58, -1.03. Fading to test the last break higher off the 200 day SMA.

Gold: 1293.30, -20.50. Rejected at the 50 day SMA, rolling over hard and selling to near the early March interim bottom.


First earnings with the financials at the plate: JPM, WFC, FRC, PNC.

Earnings are overall expected to underperform recent quarters. If there are surprises upside they could help the indices finish that last open space up to the prior highs over the next couple of weeks.

Once there, that is the real issue: break through or stall?

Consider your normal earnings season: during the expansion most start off, some beats help start driving stocks higher, or in some cases after a slow start, they move upside begins. Then the earnings are a known quantity, and while individual stocks will benefit as a result of good results, overall the market loses upside momentum.

Accordingly, if the initial rounds of earnings drive the indices up to the prior highs or close thereto, the normal course of the earnings season suggests they could lose their momentum at that point. Thus, a good idea to take some solid gains as the results are logged and the indices move higher. Then, when at a possible peak, we are automatically lighter in positions, having banked gain and not as exposed to any potential downside.

Heading into results, there are still stocks in very nice setups that can deliver pre-earnings moves even now. AMD and the like have tested recently and have very nice setups. We would not turn down the opportunity to make some money on them as the indices make a move at the prior highs, bank some gain, then see what the reaction is.

Have a great evening!

End part 1 of 2
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