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4/13/2019 Investment House Daily
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MARKET ALERTS:
Targets hit: AVGO; NFLX; TXN
Entry alerts: CAT; VMC
Trailing stops: ULTA
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.
MARKET SUMMARY
- Out of the lethargy, a Friday break higher.
- Early earnings, M&A, old highs magnetism, even some good old pessimism help break the indices up out of idle speed.
- Industrial stocks lead the pack higher.
- Friday happy hour or a new break? This week will tell that story.
Just a week ending TGIF break higher or did Friday mean something more? Fridays can always deliver head fakes. There is the old adage buy on Monday, sell on Friday, and with stocks posting some good moves Friday on some positive news stories, it could be the results were juiced a bit.
Disney announced its Netflix-aimed streaming service, CVX is set to buy APC (and perhaps set off a war with Oxy as the latter previously offered over $70/share and a cash sweetener to APC -- and as an owner of APC stock, I would like to see the OXY deal), and Chinese export data improved. A veritable cornucopia of positives that helped fuel futures all pre-market and indeed into the close -- after a midmorning hiccup tested the higher open.
SP500 19.09, 0.66%
NASDAQ 46.80, 0.46%
DJ30 269.25, 1.03%
SP400 0.76%
RUTX 0.36%
SOX 1.43%
NASDAQ 100 0.44%
VOLUME: NYSE +15%, NASDAQ +1%. NYSE trade posted a nice bounce, but still turned in a below average session. But for some massive volume on CVX, APC, DIS, NFLX it would have scored another significantly below average session a la NASDAQ. Thus, despite the upside, not a general groundswell of buying
ADVANCE/DECLINE: NYSE 1.8:1, NASDAQ 1.3:1. Breadth shows what DJ30's gain did not, i.e. outside a few excited areas thanks to M&A, Disney, and a continued interest in so-called old economy stocks (e.g. industrials, machinery), the lethargy mostly remained.
So, the question again: Friday happy hour or the start of a meaningful move?
Well, as on the famous Saturday Night Live skit from the 70's (at least famous to my age demographic) about whether Shimmer Floor Wax was really a floor wax or actually a dessert topping, it's both!
After a week of rather lame lateral lethargy (getting in some alliteration early), the indices were primed for an upside move. Friday is a good day for upside bounces, particularly when the M&A fuel is added. Interestingly, that often comes on a Monday but perhaps CVX and APC had a reason for a Friday announcement and perhaps that has something to do with OXY attempting some interference.
Regardless, the news helped push some key stocks (DIS) and some in a ripe sector (energy) upside, and that had some, though limited, coattail effect.
There is also the 'moth to the flame' or magnetic pull forces at work as the indices near the old highs discussed a few times over the past week or so.
Earnings are also a factor. Friday JPM earnings sent it higher 4.69%, gapping over the 200 day SMA. PNC earnings jumped it 3% and over the 200 day SMA as well. WFC earnings, well, WFC lost 2.62%, falling away from the 50 day MA's. The prior earnings aided financials overall, however, and helping BAC, C, V to nice gains.
Earnings are here, are expected to be so-so, but often is the case some big names, e.g. JPM, beat and that relieves some earnings anxiety and loosens the bids back up. The result is an initial earnings bounce.
Further, recall Thursday my discussion of the pundits hedging their comments on the financial stations, concerned that the week's flat action after the indices moved higher indicated the market move had stalled. I noted that they could be correct in a sort of self-fulfilling prophecy, but often when the technical picture still looks solid (lots and lots of good-looking patterns in quality stocks) these calls represent a shakeout that sets up a new move.
All these factors can merge and produce a run at the old highs. From there you have to see if the sellers show up or not. In the interim, Friday perhaps marked the start of that rally to test the prior highs given the index breaks higher from the week of slow sideways sloth (and yet another, albeit weaker, use of alliteration). Good stocks in good patterns moved higher.
As always with Friday moves, however, the start of the week is key. Will the move be rejected or will more bids appear to drive it on? We liked what we saw Friday in key groups receiving money, and we indeed bought some positions. Took some gain as well mind you, but that is how you roll with the money movement in the market, taking gain on areas that have run well and also buying into areas where the money is moving.
THE MARKET
CHARTS
DJ30: Starting with the Dow given DIS and CVX. DIS gapped to its best gain since I wore mouse ears. CVX dropped on the APC announcement. JPM gapped and rallied on earnings. BA rallied 2.5%. There you have it, the ingredients for a 1% gain. The move, however, only managed to bounce DJ30 to just below the early April highs. Good pattern to bounce, it did, now the recent high at 26,488 then the last two highs making up the all-time high.
SOX: A toss up with SP400, but SOX had the bigger gain. Gapped out of its weeklong lateral move over the prior all-time high, adding to the its market leadership position, closing out the session at the high.
SP400: Midcaps continue to assert market leadership though still a long way from the prior highs. Broke out from the 61% Fibonacci retracement double bottom and now working on the resistance from the 2009 level.
NASDAQ: Gapped to a doji Friday, back at the recent highs. After edging past the July 2018 peak NASDAQ has struggled to advance. Leadership from software is flat at best while FAANG stocks are decent but not rallying much. Semiconductors are pulling most the load but they of course are not as large a market cap as the huge NASDAQ names. Past the recent highs, now eyeing the prior all-time highs near 8150, but not finding a lot of strong bids.
SP500: Nice gap and rally to close just below the late August 2018 penultimate high to the twin peaks in September. With financial stocks, large industrials, and some energy moving higher, SP500 is running straight at the prior highs.
RUTX: Did not participate Friday, bumping again at resistance and still below the February peak. Long way from the old highs, needs to follow, needs to breakout from the same pattern SP400 just broke from. Needs it for the economy's sake.
LEADERSHIP
Machinery/Manufacturing: Solid again. UTX gapped higher, breaking out from a 2-week handle formed after the breakout from the inverted head and shoulders. Nice. MMM gapped and rallied to a new recovery high. CAT gapped and is trying a breakout. CMI continues upside. ETN, EMR look pretty solid.
Financials: JPM of course led the group. BAC solid break higher, C following. V, MA received some coattail action. WFC is just bad. Regionals . . . so-so at best.
Transports: Moving upside again. CSX (rails) jumps off the 20 day EMA test. NSC breaking higher from a 2 week flat consolidation -- just as with many industrial side stocks. ODFL, JBHT in trucking showed excellent ends to the week. Airlines mixed.
Semiconductors: Excellent action. AVGO gapped and rallied on volume. QRVO moving higher decently. TSM gapped off the 10 day EMA and closed at a recovery high. LRCX gapped to a doji. MCHP flattish as was AMD, AMAT.
Materials: Mixed at best. USCR moving up. LPX struggling to clear the 200 day SMA. TREX surging.
Energy: Despite the deal, it was not a banner session. XOM gapped nicely upside then reversed -1.26%. CVX gapped and sold to the 200 day SMA on the APC deal. OXY, an APC suitor, gapped below the 50 day MA but recovered to 'just' a 2.75% loss. APA got excited and gapped up to test the 200 day SMA, then faded much of the move. Smaller was good: NBL to the 200 day SMA in a gap. But, again, not across the board: NBR still testing, CRZO and DNR testing as well.
FAANG: The group is a big question mark. FB trying to make a more significant move and not bad looking. AAPL in a nice lateral move over the 10 day EMA. AMZN doing the same as volatility dries up. AMZN, APPL prepping for bigger moves. NFLX dropped through the 50 day MA's on some potential competition that may be profitable in 5 years. Overreaction? Could be but it looks toppish. GOOG came to life; gapped and rallied past the early April high, better volume. FB, GOOG moving a bit, AAPL and AMZN trying to set it up.
Biotech/Drugs: Some great moves (e.g. ILMN). ARQL testing but ARWR after testing had a bad Friday.
MARKET STATS
Stats: +269.25 points (+1.03%) to close at 26412.30
Nasdaq
Stats: +36.80 points (+0.46%) to close at 7984.16
Volume: 1.97B (+0.51%)
Up Volume: 1.22B (+399.1M)
Down Volume: 725.19M (-394.81M)
A/D and Hi/Lo: Advancers led 1.3 to 1
Previous Session: Decliners led 1.21 to 1
New Highs: 121 (+39)
New Lows: 45 (+10)
S&P
Stats: +19.09 points (+0.66%) to close at 2907.41
NYSE Volume: 796.314M (+14.53%)
Up Volume: 486.883M (+194.199M)
Down Volume: 291.632M (-3.468B)
A/D and Hi/Lo: Advancers led 1.76 to 1
Previous Session: Advancers led 1.19 to 1
New Highs: 153 (+32)
New Lows: 21 (+4)
SENTIMENT
VIX: 12.01; -1.01
VXN: 15.63; -1.03
VXO: 11.74; -1.04
Put/Call Ratio (CBOE): 0.74; -0.25
Bulls and Bears:
Bulls rose on an up week, bears faded on that week, but the moves were modest. The big moves are in the bank so to speak after the bulls and bears crossed over in the big year end selloff.
Bulls: 53.9 versus 53.4
Bears: 19.2 versus 19.4
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: 53.9 versus 53.4
53.4 versus 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: 19.2 versus 19.4
19.4 versus 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
OTHER MARKETS
INTEREST RATES
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: 1.12896 versus 1.12618
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: 111.757 versus 111.592. After a 4-session test back to the 50 day MA, Friday dollar surged back up and through the 200 day MA again.
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: 63.89, +0.31. After the rally off the 200 day SMA through Monday, oil worked laterally as the 10 day EMA caught up to it.
Gold: 1295.20, +1.90. Trying to hold support after the Thursday drop back below the 50 day MA.
MONDAY
Earnings have started, lots of data coming as well. Regional manufacturing (New York, Philly), Industrial production, Beige Book, Retail sales, LEI, Housing starts and permits. A full schedule but outside of retail sales and the regional PMI's, not that earth moving.
Other factors are at work: the magnetism then repulsion of the prior highs. Continual headlines regarding trade. The ongoing upward bias. A still compliant Fed.
Earnings expectations are not great, and as JPM showed, a solid beat is rewarded. C, GS, BAC, JNJ, NFLX, IBM, TEAM and many others get really rolling this week.
Thus, we look for a continued move higher on the general upside bias, expectations of a trade deal, a still compliant Fed, and a good reception to earnings.
We want to play that continued move higher as that Friday upside break shows, capturing the run up toward those prior highs. At this juncture, that is all you can anticipate. Once at the highs you watch to see if sellers come in and sell the leaders on high volume. If not, the move still continues though it might test near term.
Not that complicated, though it is easy to make it such as seen last week: many the pundits are so preoccupied with an impending selloff, if a stray dog wandered by and barked some of them would pass out.
Have a great weekend!
End part 1
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