Sunday, April 07, 2019

The Daily, Part 1 of 3, 4-6-19

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4/6/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: None issued
Entry alerts: ARWR; UTX
Trailing stops: None issued
Stop alerts: None issued

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The Market Video is DIVIDED into component parts: Market Overview, Economy, Technical Summary, and the Next Session. Choose the segments you are interested in without having to search a longer video. Click on the link to the portion you wish to view.




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.


- The upside week continues through Friday with the small and midcaps taking the lead.
- Market rotation thus far remains beneficial, though software is at the lick log.
- Jobs recovery from a weak February, but the internal data does not show the same improvement.
- Economic data is not great, not bad, inflation mostly tame, but Fed hikes are still negatively impacting the economy.
- Other areas trying to move up into leadership: materials, energy, manufacturing, machinery, biotechs
- Indices approaching the prior highs, drawn toward resistance.

Jobs were good enough on the headline, and that was good enough for stocks to take already upside futures and run them higher on the session. Never mind the internals of the report were just not as strong as the pre-February (the flop month) numbers. Higher paying jobs were low in number (manufacturing lost 6K), fulltime jobs tanked 190K while part-time jumped +60K, participation dropped 2 BP, earnings growth dropped off sharply (0.1% versus 0.4% February), and the number of working fell 201,000. But the headline number beat (196K versus 175K expected), and that was all that mattered.

Impressive moves to end the week that was a very solid upside week.

SP500 13.35, 0.46%
NASDAQ 46.91, 0.59%
DJ30 40.36, 0.15%
SP400 0.73%
RUTX 0.96%
SOX 0.80%
NASDAQ 100 0.51%

VOLUME: NYSE +8%, NASDAQ +1%. Respectable rise, but both exchanges still below average. The only above average session on the week was Wednesday, and then only on NASDAQ, the session where stocks shot higher then reversed a lot of the gains. Thus, a rise but not backed by a ton of buyers. That is okay in this market, however, because there are no sellers. The real trick is when the indices reach or approach the next resistance levels and the rapidly approaching all-time highs.

ADVANCE/DECLINE: NYSE +2.5:1, NASDAQ +2.3:1. Respectable, aided of course by the small cap and midcap leadership.

The action for the week was very interesting. Every index rose, but they traded off day to day as to the strongest. SOX started strong and set the tone. DJ30 strong Monday and then Thursday when SOX took a day off. Friday saw RUTX and SP400 jump back to the front of the pack after lagging rather notably.

Rotation. It doesn't just make your tires last longer, it makes rallies last longer.

All indices logged new recovery highs on the week less RUTX. SOX put in a new all-time high. SP500 is 47 points off. Not bad moves as the indices are taking down resistance levels one at a time. The 2018 topping pattern is still in place, but the indices are working on it piece by piece, resistance level by resistance level.

The upside bias is strong in this one. When there is news that favors it, it rises. When there is no news, it does a decent job of rising. When there is bad news, such as the 3 month/10 year yield inversion, the market sells, holds support, then rebounds.

The inversion was perhaps the biggest, but not the only negative news. BA's issues, TSLA, mediocre to disappointing economic data.

Still, the allure of a trade deal, really being talked up by the administration and indeed this past week the Chinese vice premier, is strong. It was surprising to see the strength of the market Thursday on the positive comments about being 90% complete -- even though the last 10% are the same issues that pretty much started the dispute. The market is in a believe what it wants mode -- as it usually is when it rallies.

In the big picture, the economic data is not great but not bad. It is mediocre enough to keep the Fed at neutral. It is not as strong as the Administration wants, so now it is in a full court press for the Fed to cut rates. Two potential Fed appointees, Moore and Cain, both say a 50BP cut is appropriate. Perhaps it is; as I have stated many times before, the Fed hiked into a slowing economy. Just pausing hikes does not remove the impact -- still to be felt -- of those rate hikes. To get out of the slow patch expeditiously -- if at all -- seemingly necessitates the hikes to be removed. Of course, calling for a 50BP cut and on top of that more QE as the President was apparently doing Friday, is typically not the way to get it as it ties the Fed's hands. Nonetheless, this President has a way of getting things that appear out of reach. This drama will no doubt continue.

This combination of slower data, relatively tame inflation, trade deal possibilities, and talk of more Fed largesse provides the backdrop for a market with a continued upside bias pretty much regardless the story. Sure it can be knocked back some, but when that happens it simply puts in a normal consolidation for a bull market and resumes the move upside. Thus far that is exactly what is happening as the indices are drawn toward the old highs and it appears they want to take them on.



SOX: New highs for SOX intraday and on Friday, closing. The first to make new highs and thus far showing little blowback from sellers. As discussed many times before, SOX is directionally very important to the overall market: where SOX goes the other indices tend to follow. With SOX at new highs, if it holds onto the gains, the other indices have its tracks to follow.

SP500: 7 days upside in a row, adding to that longest win streak in over a year. Well over 2800 and now it is countdown time for the August 2018 penultimate high (2916.50) and the September/October small twin peaks (2940.91) that set off the October through December selloff. Low volume as it approaches those highs just 24 and 48 points away. That makes it more difficult to break through major resistance, but of course you would expect SP500 to perhaps pause at those levels and test a bit, particularly if it continues directly to them on this already solid price move.

NASDAQ: After a Thursday pause, NASDAQ cracked just above the late July penultimate high (7933) and now is entering the August to early October consolidation and small double top similar to SP500's peak (8133.30; closed at 7938.69). As with SP500, volume is running light on this move whereas on the March run at least trade was bouncing around average. Low volume approaching new highs is problematic, but as with SP500, with a run such as this, a bit of a pullback as NASDAQ hits the later resistance levels is normal.

DJ30: The Dow is through the November peak with a nice Thursday move and a somewhat equivocal doji Friday. It is still below the January 2018 peak (26,616.71) and of course the September interim high and the October all-time high (26,952). Volume is rather pathetic. No, it is pathetic, coming in well below average the past 2 weeks. That said, many Dow stocks are performing quite well in very nice patterns.

SP400: After a steady though uninspired move most of the week, SP400 posted a solid Friday advance, clearing the late February recover high, the high that marked the first index to clear that October/December trading range.

RUTX: A market-leading Friday move as the small caps put bold letters on the end of a somewhat lethargic week. Broke through the 200 day SMA Friday, closing in on the February peaks.


While some leading groups such as software continue to look overextended, machinery, materials, industrial metals are making some upside moves. Transports are not bad. Some 'old school' areas are trying to step up, and that does not look back for the economy.

FAANG: Overall came to life though not explosive. AAPL up on the week, finally moving through and up off the 200 day MA to a new recovery high. No volume. New recovery high for AMZN, also with no volume. FB enjoyed a strong week and a breakout to a new recovery high. NFLX continues its dormancy; up on the week but trailed off to end the week, holding the range. GOOG posted a solid move higher off the trendline, paused Friday.

Software: Struggled on the week with some sharp drops to the 50 day MA. Still quite weak and threatening breaks lower: WDAY, DATA, NOW. MSFT is still a leader, trending up the 10 day EMA, COUP not bad but in a 2 month consolidation still.

Machinery/Manufacturing: CMI off Friday but a solid break higher on the week. CAT still poised to break higher. UTX started higher Friday out of a short consolidation. MMM a week straight up. BA was up for the week but stalled at the 50 day SMA Friday.

Biotech/Drugs: Some very interesting moves shaping up. We bought some ARWR Friday. BLUE may be ready to make one of its torrid runs. ARQL looks good and others looking better.

Semiconductors: Still a major leadership group though not all rising. MCHP continued a strong move to a higher high. Ditto LRCX. Good short term tests from AVGO, RMBS. XLNX still slowly climbing up the 10 day EMA. SWKS trying to break higher though not finding volume.

Food/Restaurants. Still come good setups, e.g. DRI, PEP, CAKE. MDLZ at a high, attempting to consolidate for a new move. CMG is in a similar lateral short consolidation.

Materials: Improving off the lows. LPX broke up through the 200 day SMA. CX moving up through the 50 day MA. USCR moved through the 200 day on the week and is trying to set up for a new move. VMC is making a short test after a breakout.

Metals: Industrial metals are not bad. CLF trying a short double bottom. FCX breaking through the 200 day SMA.

Energy: With oil still moving higher, some oil stocks are finally showing life -- again. This group has given more false moves and head fakes than any other. That said, some very solid moves in good patterns, e.g. APC, CVX, DVN, XOM.


Stats: +40.36 points (+0.15%) to close at 26424.99

Stats: +46.91 points (+0.59%) to close at 7938.69
Volume: 2.15B (+0.47%)

Up Volume: 1.54B (+330M)
Down Volume: 591.99M (-327.65M)

A/D and Hi/Lo: Advancers led 2.29 to 1
Previous Session: Advancers led 1.31 to 1

New Highs: 104 (+37)
New Lows: 31 (-5)

Stats: +13.35 points (+0.46%) to close at 2892.74
NYSE Volume: 769.784M (+8.76%)

Up Volume: 572.725M (+64.373M)
Down Volume: 182.025M (-11.042M)

A/D and Hi/Lo: Advancers led 2.54 to 1
Previous Session: Advancers led 1.88 to 1

New Highs: 116 (+23)
New Lows: 8 (-2)


VIX: 12.82; -0.76
VXN: 16.17; -0.62
VXO: 12.23; -1.25

Put/Call Ratio (CBOE): 0.82; +0.01

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 7BP from to 9.4BP

The 2 year remains below 10 year: Spread back to 17 from 19BP

10 year: 2.508% versus 2.528%

3 month: 2.434% versus 2.434%
2 year: 2.339% versus 2.341%

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: 1.12224 versus 1.12444. Gave back some of the Wednesday bounce to the 10 day EMA.

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: 111.655 versus 111.483. Breaking up through the 200 day SMA, giving it a run again after failing here in the first half of March.

Historical: Last below 109 in June 2018 then tumbled to 107 in early January 2019. 114.51 is the recent high from October 2018.

Plunged lower in December then a recovery to the 200 day SMA in March. Has struggled at that level below the Q4 2018 trading range. 114.60 is the top of the longer term range.

Oil: 53.08, +0.98. Breaking higher Friday from a short consolidation post- breaking over the 200 day MA Tuesday. Oil looks quite strong.

Gold: 1295.60, +1.30. After the peak in mid-February, gold is back to the upper trendline in the big triangle. Bounced once, now fading back to that level again to try for a double bottom.


Not a real slowdown in the economic data on the week. Factory Orders, CPI, FOMC minutes. More than that, earnings season is here. Plenty for the market to mull, but for now the market maintains a steady upside bias. Yes, it is tested by less than savory news such as the yield curve inversion selling just over a week ago, but the bids return. A similar circumstance occurred last earnings season when stocks would fall on results, hold onto support, then recover.

Rotation occurred the past week with late week some more 'old economy' stocks starting to perform or at least show good setups to try to make upside breaks. Energy, materials, machinery, manufacturing, food. This in addition to the semiconductor leadership. Indeed, it would not be surprising to see the software stocks struggle some more as money moves to some of these other areas.

Late week we were buying stocks such as UTX, FDX, CMI as they broke higher. AAPL as well -- some of these older big names in tech are performing. We will continue looking at those and also some energy and more biotechs to catch good moves as they start.

The prior highs are looming as both resistance and as a magnet. We want to play the upside move as long as it lasts and then see how the market reacts to the resistance.

End part 1
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