Tuesday, April 09, 2019

The Daily, Part 1 of 2, 4-9-19

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4/9/2019 Investment House Daily
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Targets hit: None issued
Entry alerts: ARQL; FB
Trailing stops: FATE
Stop alerts: GOGO

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- Possible trade war expansion in Europe, IMF downgrading world growth trigger some profit taking in a market ready to test.
- JOLTS jobs openings fall an impressive 500+K
- Indices testing orderly thus far, key is the leader SOX.
- Earnings starting Friday with the banks.

Stocks started to slide early morning on Trump's comments he was ready to implement $11B in tariffs on EU goods based upon subsidies to Airbus that are in violation of WTO rules. Trade issues were mostly ignored for positive comments Monday, but the prospect of opening up a new or expanding war with the EU definitely put a drag on a stock market that was already a bit top heavy given the run higher the prior two weeks.

As of Monday, SP500's gain was nearly identical to the moves of the previous upside leg. As noted Monday, that made the indices somewhat ripe for a test of the move.

Add to that the IMF, releasing just minutes before the opening bell, a communication it was cutting the world growth forecast to 3.3% from 3.6%. That is the third cut in six months. US was cut to 2.3 from 2.5%. EU to 1.3% from 1.6%.

When that news hit the futures to immediately dropped to the pre-market lows. They recovered some lost ground to midday, surviving a JOLTS report that saw job openings fall 538K, the most in 42 months. That rebound did not last, rolling back over and down to match the early session lows in the last hour.

The lower open was modestly bought, but hit the wall midday, dropped back to the session lows, and that is pretty much where they closed.

SP500 -17.57, -0.61%
NASDAQ -44.60, -0.56%
DJ30 -190.44, -0.72%
SP400 -1.14%
RUTX -1.22%
SOX -1.14%
NASDAQ 100 -0.41%

VOLUME: NYSE -4%, NASDAQ FLAT. Volume again fell or remained low on the two exchanges, coming in again below average. That at least shows no real selling, just pulling the bids on certain areas that enjoyed a pretty solid 2 week upside move.



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Mostly a modest pullback, but they usually are until they are not.

As noted Thursday, SP500's move is almost the image of the prior rally in March. And in February. The market loves symmetry. Thus a test Tuesday was not unusual. Lighter volume shows no selling, just bids pulling back. Thus far nothing nefarious. Given SP500 tested the 50 day EMA in early March before that rally, it is likely SP500 does not have to revisit that level before trying to rebound once more.

NASDAQ shows similar action. A February rally of just over two weeks, a test of the 50 day EMA, then a March rally roughly two weeks, a 20 day EMA test, then the recent rally of the same length. NASDAQ further bumped the late July peak and found some resistance. Lower volume, no real selling, more a lack of buyers.

SOX gapped lower off the Tuesday new high. Closed at the prior all-time high. Likely 10 day EMA ahead, perhaps a fill of the most recent gap at 1431. That remains to be seen - as noted, in these upside moves they typically start quiet and then deteriorate. Stocks such as INTC, LRCX and AVGO, leaders of the group, have already put in a nice little test and could be ready to make a new move as others such as MCHP test back.

DJ30 is testing as well, a second session already, a bit ahead of the other indices due to its Boeing illness. BA gapped lower Monday and again Tuesday. Closed near the 10 day EMA, light trade. Testing the break higher from just over a week back. 26,000ish (closed at 26,150) is the test you want to see hold as that level is the bottom of the October/December range.

SP400 and RUTX lagged rather notably, down easily over 1%. RUTX is back at the 10 day EMA, SP400 as well. Not leaders a la SOX, but important given their domestic economy ties. Thus far holding up at near support.


Mixed is one way to put it. Some areas sold harder, jeopardizing their upside attempts (machinery). Others tested normally, e.g. semiconductors, oil.

Financials: Tested more and that is not bad as BAC, C, JPM tested modestly. GS actually looks pretty decent. MA, V still in good tests.

FAANG: Mostly testing some though FB added some pretty solid upside. AAPL, AMZN testing. GOOG in a very nice hammer doji over the 20 day EMA. NFLX actually bounced. Hanging in with decent tests.

Materials: Mixes and some struggled, e.g. CLF. FCX tested its break higher. LPX in a fairly decent test.

Energy: Monday's good moves tested some, e.g. DNR, CRZO, APC. Others a bit more downside but not breaking the pattern, e.g. XOM, CVX.

Machinery/Manufacturing: Not good action from stocks such as DE, gapping lower and selling off through the 50 day MA. CAT fell harder back toward the 200 day SMA. CMI still solid, UTX as well. They need to step up.

Biotech/Drugs: Not bad tests, e.g. ARWR, BLUE. ARQL made a new break higher on solid volume.

Semiconductors: AVGO, INTC testing nicely. MCHP tested some for the first day. SWKS lost a bit of ground on light trade. Still solid as a group, just what the market needs.


Stats: -190.44 points (-0.72%) to close at 26150.58

Stats: -44.61 points (-0.56%) to close at 7909.28
Volume: 2.07B (0%)

Up Volume: 647.61M (-572.39M)
Down Volume: 1.39B (+553.12M)

A/D and Hi/Lo: Decliners led 2.69 to 1
Previous Session: Decliners led 1.16 to 1

New Highs: 65 (-27)
New Lows: 34 (0)

Stats: -17.57 points (-0.61%) to close at 2878.20
NYSE Volume: 714.624M (-3.65%)

Up Volume: 148.391M (-264.418M)
Down Volume: 559.429M (+249.604M)

A/D and Hi/Lo: Decliners led 2.99 to 1
Previous Session: Advancers led 1.05 to 1

New Highs: 67 (-30)
New Lows: 15 (+9)


VIX: 14.28; +1.10
VXN: 17.65; +0.83
VXO: 13.53; +1.17

Put/Call Ratio (CBOE): 0.86; +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 remains below the 10 year: Spread down to 7BP from 9BP

The 2 year remains below 10 year: Spread held at 16BP

10 year: 2.502% versus 2.522%

3 month: 2.437% versus 2.429%
2 year: 2.342% 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: 1.1266 versus 1.1262

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: 111.15 versus 111.47

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: 63.98, -0.42. Faded off the 2-day surge off the 200 day SMA. Nice easy test.

Gold: 1308.30, +6.40. Broke upside to the 50 day SMA. Continues to be somewhat tenacious, weak pattern but won't break lower.


CPI out before the open, FOMC minutes in the afternoon. Earnings starting up Friday morning with JPM, WFC. Just another week in the market. After a run higher the past two weeks, a bit of nervousness ahead of the results.

Some are saying results will disappoint overall this season, showing lower growth. The stock prices are not suggesting that for many groups.

We have several good positions working and want to let them continue working into earnings where we will bank more gain ahead of the results in several cases.

We could still take new positions, but did not like the action in some of the new areas trying to bring themselves up, e.g. machinery. Most held the line, but each test has its own scrutiny required, and with this test coming after the indices closed in on the old highs -- or in the case of SOX, after breaking to new highs -- the perception is there is more at stake.

SOX has to be the focus. When it decided to lead the market overall made serious progress. It is now testing its breakout to a new high. How that breakout holds tells the near term fortunes, i.e. a hold of near support and a new move upside, or breaking below the former high with some force portents a deeper test.

Accordingly, see how the test plays out, see how the leaders hold up, and if so, look for new upside opportunity if the test holds and bounces. If things are a bit volatile, nothing wrong with banking some more gain on some options and stock positions.

Have a great evening!

End part 1 of 2
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