Thursday, April 25, 2019

The Daily, Part 1 of 2, 4-25-19

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4/25/2019 Investment House Daily
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Investment House Daily Subscribers:


Entry alerts: ZS
Trailing stops: CMI; SWKS
Stop alerts: FDX

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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.

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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.


- FB, MSFT earnings push the indices higher, but holding the move proves difficult.
- Indices again struggle at or near the old highs.
- Earnings 1/4 over, and despite some impressive big name beats, overall they are negative.
- AMZN earnings afterhours sport a massive bottom line beat, but the stock is virtually flat.
- The longer a breakout over the old highs remains elusive, the more likely it doesn't happen this time. But, GOOG is still to come next week . . .

Lots of earnings fanfare from FB and MSFT and both of those stocks gapped upside, leading an early market surge. MMM on the other side of the ledger gapped sharply lower on an impressively bad miss. UPS and NOK were notably poor performers as well, and CMG's early plunge to the 50 day EMA gave us close to 60% gain in a very fast downside earnings play.

Yes, there was the good, the bad, and the ugly. All in one session.

What was certain to be a breakout session for the indices was not so grand. Not terrible, but not up to many expectations in the aftermath of FB and MSFT earnings. There were gaps higher, but most faded at least part of that move. The result was at best a mixed session, more indices ending negative versus positive.

SP500 -1.08, -0.04%
NASDAQ 16.67, 0.21%
DJ30 -134.97, -0.51%
SP400 -1.14%
RUTX -0.79%
SOX -1.81%
NASDAQ 100 0.42%

VOLUME: NYSE -2%, NASDAQ -2%. Lower volume, still below average, no churning, no buying. Nothing seriously negative.

ADVANCE/DECLINE: NYSE -1.8:1, NASDAQ -1.5:1. Lagging small and midcaps.

It was not a bad session. Do not get me wrong. It just was not up to the possibilities.

And . . . not up to any new index breakouts.

To view, click on the following links:

Earnings season is about a quarter over. The fear was this season would reveal a serious economic slowdown. First blush from some big names is that those fears were overblown. Thus, some great moves from some big names. But, the overall market is not making serious headway against the prior highs. Good news, some movement, but nothing definitive to the upside.

This morning CNBC reported that one-quarter through the season bottom line earnings are running -1.1% year/year. Not huge, but it surprised everyone on the set given the beats by big headline companies. Revenues, on the other hand, are up a solid 5.1%. Hey, that is better than prior quarters and to us a good indication. Still, earnings are missing and that is an indication that perhaps there IS an earnings recession in progress.

More importantly, earnings season has seasons of its own. The initial results where the first reveals are made either surprises upside or downside. A lot of enthusiasm exists, and on solid results stocks jump. Once the gist of the season is known then the excitement dulls. Individual stocks still move on the results, but the market overall tends not to follow as much . . . unless there are a series of really big results that simply surprise the heck out of everyone.

With the indices at the prior highs and the first group of big names unable to surge them through with some pretty darn good results, the probabilities of that breakout surge wane. Certainly GOOG and company can provide the catalyst for a serious breakout, but as the season progresses and initial solid results could not do it, it becomes less likely subsequent results can do the trick either.

Accordingly, as you move ahead in the season you look at the rising probability the indices put in a near term peak and test back off that before moving on.

Look at AMZN. A multi-DOLLAR beat. $7.09 vs 4.72 per share. Revenues were, however, just in line. Those were explained, however, as AMZN was working on converting Prime from 2-day to 1-day delivery. That is a big upgrade and costly. Makes sense. STILL, afterhours AMZN is basically flat, up 10 clicks after gyrating up and down though in a narrow range. No real excitement on a huge beat. Volatility in its options is going to get utterly crushed tomorrow and they will lose a lot of value with the stock going nowhere.

That is beside the main point, however: huge beat, huge things brewing at AMZN, but virtually no stock reaction. Earnings running their course for this season? We will see.

Watching the action in MSFT, FB, AAPL, CMG and others, we of course were banking gain early on. ODFL gapped upside and we took the gain; had a feeling it would reversed off that early move. We banked CMG puts bought just ahead of the Wednesday close as it sold hard and fast to the 50 day MA then started to build a shelf. Took the 60% gain and moved on to take gain on STLD (downside), AMZN, GOOG, FB, LRCX. The indices bumping resistance, stocks gapping up on good results then starting to fade. They can still advance of course; we were just playing the probabilities, particularly with positions in May options.

Afterhours more earnings outside of AMZN. MAT beat and jumped 1.50 -- very nice for a $12 stock. SBUX beat bottom line and gapped upside; it missed on the top line, however, and sold back a lot of the gain.

A big potential problem is INTC and its weak guidance. It beat on the top and bottom but margins were mediocre and it guided lower. Afterhours it was hit pretty hard, off 4 clicks or about 7%. Other stocks are lower in sympathy, e.g. NVDA. INTC may have some serious coattail effects in the leading market sector. That said, its i7 gen 8 with the Radian graphics chip on board is pretty incredible. Okay, a bit of a digression, but we are running those right now in some new computers in the office and they are smoking. That, however, is not helping INTC afterhours.

It would thus appear the Dow is going to get hit yet again by another of its components. BA, IBM, MMM -- oh well.

More than that, the midcaps and small caps are again at or in the lead of the decliner board.

Okay, that sounds like a fairly gloomy prognosis. Not at all. A bit of rest and recovery sets a new move. The overall thesis remains in place: compliant Fed, yield curve heading -- slowly -- in the right direction, good enough earnings, solid enough leadership.

That is still a good scenario, we just need to be ready in the event earnings cannot push stocks on through to the next level, at least just yet. Money has rotated in the market, finding new leaders. That continues setting up new patterns and new breakouts. Perhaps that will thin a bit near term, but we are continuing to look for plays that can make us money -- upside and down. CMG and SHLD worked well downside and others are in position to move lower after more earnings hit the wire.

At the same time we have banked large chunks of upside gain as well over the past week as the indices and stocks moved to some resistance. With earnings not breaking the indices through resistance with clear moves we are very comfortable doing that. EVEN IF they do move through, we still feel we will get great entries as they test that move, and they always test.

Therefore, we will be looking at those downside plays we have on the report, and if they break lower we will be ready to enter. As for more upside, no issues IF the play is right. The beauty of this market is that some areas may be extended but others are getting the money rotated to them. If they are in the latter groups, the moves will show it and we can pick some up with confidence, but also knowing that the indices overall, perhaps outside of SOX, are having difficulty getting through the old highs and putting moves on them. And, even SOX may have some issues now due to its own success followed by the INTC disappointment.


Stats: -134.97 points (-0.51%) to close at 26462.08

Stats: +16.67 points (+0.21%) to close at 8118.68
Volume: 2.07B (+1.47%)

Up Volume: 823.42M (-216.58M)
Down Volume: 1.22B (+238.12M)

A/D and Hi/Lo: Decliners led 1.47 to 1
Previous Session: Decliners led 1.09 to 1

New Highs: 78 (-50)
New Lows: 59 (+14)

Stats: -1.08 points (-0.04%) to close at 2926.17
NYSE Volume: 789.532M (-1.46%)

Up Volume: 267.264M (-56.687M)
Down Volume: 516.608M (+49.999M)

A/D and Hi/Lo: Decliners led 1.79 to 1
Previous Session: Advancers led 1 to 1

New Highs: 69 (-61)
New Lows: 42 (+15)


VIX: 13.25; +0.11
VXN: 16.49; -0.18
VXO: 12.83; +0.17

Put/Call Ratio (CBOE): 0.85; -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 rises 1BP to 10BP

The 2 year versus the 10 year: Spread holds at 20BP

10 year: 2.536% versus 2.522%

3 month: 2.429% versus 2.437%
2 year: 2.33% versus 2.32%

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: 1.1350 versus 1.11538. Euro continues heading lower below recent lows.

Historical: Breaking below the 1.12 level and that 6-month range formed after the euro sold off from the early 2018 peaks.

USD/JPY: 111.547 versus 112.144. Dropped to the 200 day SMA on the close, this after trying to breakout Wednesday and failing. Now a critical test for the dollar to hold up.

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: 65.21, -0.68. Fading to test the break higher, holding over the 10 day EMA.

Gold: 1279.70, +0.30. After the drop to the upper trendline of the triangle, gold is trying to hang on.

End part 1 of 2
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