* * * *
5/30/2019 Investment House Daily
* * * *
Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit: None issued
Entry alerts: DE; PCRX; SNAP; TNDM; ZM
Trailing stops: None issued
Stop alerts: PEP; TECD
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
https://www.investmenthouse.com/alertdaily.html
********************************************************************
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.
SUMMARY
- Large cap stocks bounce off the Wednesday doji, but only after testing the 200 day SMA once again.
- Upside with some serious moves by some leaders, but overall quite lackluster.
- The relief bounce is trying to take hold but not much substance thus far.
- Trade still an issue with China still trash talking. Pence trash talks back.
- Picked up some really good breaks higher and we will see if they can spur a continued relief move.
UPDATE TO THE REPORT: After this market summary was written, the President announced the US will impose a 5% tariff on all Mexican imports starting June 10. The reason is to force Mexico to do something regarding the numbers of illegal aliens crossing into the US. So, this was the 'big announcement on immigration' the President referenced earlier. This is another one of those issues that does not appear to have a quick resolution.
Stock futures are tumbling, tumbling down. SPY went out at 279.08. Right now they are trading 276.72. That is roughly, versus fair value, 150 Dow points, 18 SP500 points, and 50 NASDAQ points.
It is quite possible the Administration just undermined the bounce attempt that was in progress. One of the keys Friday will be how the stocks that moved nicely higher Thursday hold the moves.
Market Summary
As the Wednesday SP500 and NASDAQ doji indicated, a market bounce was trying to set up. Thursday the futures were higher, modestly so, and stocks open higher as well, modestly so. A rally through the first 1.5 hours peaked and trailed off to midday. It looked to be another upside session frittered away in this overall bearish action market.
Indeed, the indices flipped to negative by 2:00ET. That is when SP500 and NASDAQ both tapped the 200 day SMA. There they found support and rebounded into the close, though they closed well off the early session highs. Alas, there is a bit of an oversold bid, but it is tepid. At least the bids returned at the 200 day SMA and the indices managed to rebound.
SP500 5.84, 0.21%
NASDAQ 20.41, 0.27%
DJ30 43.47, 0.17%
SP400 -0.22%
RUTX -0.30%
SOX 0.74%
NASDAQ 100 0.40%
VOLUME: NYSE -15%, NASDAQ -19%. Shock. Volume was lower on an upside session. One of the main indicia of a relief bounce versus new, serious buying.
ADVANCE/DECLINE: NYSE 1.1:1, NASDAQ -1.1:1. Breadth anemic as well. The internals are just not indicating any serious new buying.
That the volume and breadth was light and characteristic of a relief bounce is not surprising. I don't have to go into the litany of reasons the market shows a downside bias. The predominant one: the top forming since January 2018. The others have acted as a trigger, e.g. weaker economic data (in some cases), trade talks breaking down, 3 month/10 year yield curve inversion. Reasons to take stocks lower from a top building longer term to cap a longer term, 9 year bull run.
Thus, the bias remains downside even with the Thursday bounce. It was a bounce as expected, one with not a lot of power. Some great moves in individual stocks and we picked up some very good moves, but overall the move was as the numbers indicate, just not that strong.
There were some strong stocks as noted and we picked up some of them. SNAP, TNDM, PCRX, ZM. DE was one we picked up early, it rallied, but then did not run to the close. Definitely some good bounces going, leading the rebound and we will see if they have enough power to make a decent gain for us and perhaps pull the market along as well.
THE NEWS
Trade was out front again with China ramping up the trade rhetoric once more, following its 'you were warned' comments Wednesday with accusations that the US is engaging in 'naked economic terrorism.' And we steal candy from babies as well. Chinese babies. My how you can rationalize stealing IP in 'joint ventures' as well as selling equipment with spy components built in and claim that a country wanting you to stop doing so is engaging in 'economic terrorism.' And doing so while naked, apparently.
That is okay. At a speech later in the afternoon VP Pence said that tariffs on Chinese goods could double. Terrorist indeed.
China also cancelled its 'good will' purchases of US soybeans. It can do that for now as it draws down its stockpiles, but as I wrote when this all started and there were claims that China would go 'nuclear' and stop buying from the US, China can buy all the rest of the world's soybeans and still not have enough to meet its requirements. It will have to buy from the US. It is not a case where it can go elsewhere as the US can for rare earth minerals.
Q1 GDP, second reading: 3.1% versus 3.0% expected versus 3.2% prior.
Personal consumption: 1.3% versus 1.2% prior version.
Quite strong but the worries are of course about Q2. Some are saying it will be 1.something. Could be, but I remember calls for 1 and change a couple of years ago and it blew that out of the water. We will see - June will need to be good.
Pending Home Sales, April: -1.5% versus +0.9% expected. Year/year -3.0%. The only region positive: the Midwest.
As you can see, the news was a continued trade negative, and while the economic data was mixed, with Germany and Europe sinking, the mood is not great.
OH, and do not forget: last night the PBOC (China's central bank) FLOODED its economy with yuan. China is blustering with warnings and threats aimed at the US, but it is close to tumbling into the ditch.
THE MARKET
CHARTS
To view, click on the following links:
http://investmenthouse1.com/ihmedia/f/charts/sp500.jpg
http://investmenthouse1.com/ihmedia/f/charts/NASDAQ.jpg
http://investmenthouse1.com/ihmedia/f/charts/DJ30.jpg
http://investmenthouse1.com/ihmedia/f/charts/RUTX.jpg
http://investmenthouse1.com/ihmedia/f/charts/SP400.jpg
http://investmenthouse1.com/ihmedia/f/charts/SOX.jpg
http://investmenthouse1.com/ihmedia/f/charts/nasdaq100.jpg
SP500 and NASDAQ both started higher, both sold to again test the 200 day SMA, both rebounded off that test. Not a lot of power on the move, but they held that key level again and rebounded late. That still leaves the bounce alive. Not scaring anyone with strength, but still alive.
DJ30 gained ever so modestly off the big Wednesday doji, but DJ30 could not retake the 25,222 level where the prior selloff low held. Not showing the same recovery 'pop' (and I use the word loosely) as SP500 and NASDAQ.
SOX gapped and rallied through the 200 day SMA. Then it gave up that level for a much less dramatic gain. Market leading gain, but 10 points off the high, as many points as SOX gained on the close. INTC helped as did XLNX, but it was not a surge, and a few good movers lost the gain, e.g. QRVO.
SP400 and RUTX were both, alas, bitter disappointments SP400 rallied to the March twin lows, filled the Wednesday gap lower, but then gave it al back and closed negative. That leaves SP400 below the head and shoulders neckline. Similar action from RUTX, giving up the upside and closing lower on the session.
LEADERSHIP
Personal products: Some recovery from the likes of PG, CL. Volume sketchy compared to the downside, so they have to prove the move.
Social: SNAP pushed higher on solid, above average volume. FB held its shareholder's meeting and is showing a fine pattern - that pretty picture needs to break upside. MTCH still in the pullback, holding over the 20 day EMA. TWTR same as FB in a nice pattern, testing the 50 day MA.
Drugs/healthcare: Some good moves. TNDM surged off the 50 day MA on strong, above average volume. PCRX ditto, moving through the 200 day SMA on strong volume. PTCT still looks solid as does ARNA.
Software: Security software is still getting blitzed with PANW falling on earnings, following the likes of SPLK. Others are not bad, e.g. ZS may give us the new entry. WDAY came back from its down day on earnings Wednesday. DATA not bad but not making a move upside. HUBS has to prove itself at the 50 day EMA, showing a doji Thursday.
FAANG: AMZN, FB look good. GOOG is getting a lot of thumbs up to buy from the TV pundits, but it is struggling to hang on at the prior low. AAPL is sliding in Chinese limbo. NFLX is still, yes still, working laterally in its range.
MARKET STATS
DJ30
Stats: +43.47 points (+0.17%) to close at 25169.88
Nasdaq
Stats: +20.41 points (+0.27%) to close at 7567.72
Volume: 1.93B (-19.25%)
Up Volume: 1.05B (+91.75M)
Down Volume: 849.03M (-550.97M)
A/D and Hi/Lo: Decliners led 1.03 to 1
Previous Session: Decliners led 2.23 to 1
New Highs: 59 (-1)
New Lows: 141 (-78)
S&P
Stats: +5.84 points (+0.21%) to close at 2788.86
NYSE Volume: 685.884M (-15.42%)
Up Volume: 303.786M (+42.792M)
Down Volume: 374.491M (-162.846M)
A/D and Hi/Lo: Advancers led 1.12 to 1
Previous Session: Decliners led 2.04 to 1
New Highs: 60 (-11)
New Lows: 122 (-89)
SENTIMENT
VIX: 17.30; -0.60
VXN: 21.68; -0.55
VXO: 19.42; -0.29
Put/Call Ratio (CBOE): 1.10; -0.31. Now 17 of 20 closed above 1.0. Again, the ratio is supporting a bounce, though not many others are lining up with the ratio. That means it is just one piece of the picture and not enough in itself.
Bulls and Bears:
Bulls faded farther, falling below 50 with a pretty solid 6 point drop over 3 weeks. Bears fell yet again. Bears lower on selling, VIX not spiking on selling. Appears there are more issues to resolve that this range trading action at the head and shoulders neckline has not been able to rectify.
At this juncture there are still no extremes. Bulls faded from 60 without ever hitting that level. Bears have overall been more complacent of late.
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: Shading to yellow for this week even as bulls backed off. Not in the 60's, but not much fear from the selling.
Bulls: 49.5 versus 51.4 versus 55.5
Bears: 17.2 versus 17.5 versus 17.8
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.
OTHER MARKETS
INTEREST RATES
Threat level: Red-ish. 3 month/10 year spread inverts a third time. 5 year, and 2 year are below the 3 month treasury. Third 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.
The 3 month yield versus the 10 year: Spread climbs 6BP to -16BP.
The 2 year versus the 10 year: Spread holds at 15BP
10 year: 2.217% versus 2.262%. Still sliding lower in yields as bonds rally in the breakout.
3 month: 2.378% versus 2.362%
2 year: 2.067% versus 2.109%
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.
The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.
EUR/USD: 1.11391 versus 1.11362. Showing a doji at support, higher MACD. The euro is ready to bounce and try to break the 50 day EMA. This time it looks as if it will do that.
Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.
USD/JPY: 109.262 versus 109.573. Rallied to the 20 day EMA then reversed for a loss. Trying to hold a double bottom, struggling.
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: 56.26, -2.55. Oil still getting bombed, closing below the Wednesday low and a new selloff low from the late April high.
Gold: 1292.50, +6.20. Breaking out over the 50 day SMA.
End part 1 of 2
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Thursday, May 30, 2019
Wednesday, May 29, 2019
The Daily, Part 1 of 3, 5-2j9-19
* * * *
5/29/2019 Investment House Daily
* * * *
Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit: DXD; QID; TECD
Entry alerts: None issued
Trailing stops: WDAY
Stop alerts: DRI; TREX
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
https://www.investmenthouse.com/alertdaily.html
********************************************************************
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.
TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
https://investmenthouse1.com/ihmedia/f/ts/ts.mp4
********************************************************************
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.
SUMMARY
- Bond inversion fever still present, still pegged as the reason for the selling. Sure.
- A gap to lower selloff lows, but SP500, NASDAQ show doji at the 200 day SMA.
- Some stocks are so oversold they are ready to bounce, but not in great numbers.
- Upside leaders are thin, so are the stocks set to bounce.
- Doji at support suggests a bounce, but not expecting anything big. VIX has yet to move.
- Upside plays are there but best not to let expectations overshoot reality.
Stocks continue to distribute with a downside gap on top of the Tuesday reversal selloff. Ugly session yet again, but there was a modest move off the lows. Indeed, SP500 and NASDAQ managed to show doji with tail, closing just over the 200 day SMA. After a pretty salty selloff those patterns suggest a possible bounce.
SP500 -19.37, -0.69%
NASDAQ -60.04, -0.79%
DJ30 -221.36, -0.87%
SP400 -0.62%
RUTX -0.94%
SOX 0.41%
NASDAQ 100 -0.85%
VOLUME: NYSE -43%, NASDAQ -7%. Still very strong, above average NASDAQ trade while NYSE trade backed off significantly.
ADVANCE/DECLINE: NYSE -2:1, NASDAQ -2.2:1
Bond inversion fever has again struck the stock market. After ignoring the 3 month and 10 year treasury yield inversions starting over 2 weeks back, suddenly they are important. Is it the yield curve inversions causing the selling, or were investors and traders looking for a reason why there was selling and realized the 3 month/10 year had inverted as it did in March (the first time since 2007)? Ignored for two weeks then after some ugly selling it is suddenly the main reason cited.
Perhaps. Economic slowing worries, trade talks breaking down, Fed still viewing price declines as 'transitory,' stock leaders such as semiconductors selling off hard, oil prices making an important break lower. There are a lot of negative issues out there and the bond curve starting to invert is another stick added to the pile of economic worries.
It is still not accepted across the board that a 3 month/10 year inversion is a recession indicator. One Fed district said it did some research and believes that pair is a reliable recession indicator, as reliable as the accepted 2 year/10 year curve inversion. It has become accepted in the media because it happened in 2007 and a Fed district said so. I wish I was smart enough to know for certain, but I do know that the short end yields are above the 2 year, 5 year and 10 year and that is not a good development. The Fed is being way too cavalier about prices and could find itself in the same situation as Greenspan.
Indeed, one scholar today said it was the 10 year dropping versus the 3 month rising and that makes this different than the kind of inversion indicating recession. In other words, it is not worry that is making money today more valuable versus 2, 5, or 10 years from now, just demand for the 10 year from others such as foreign governments and individuals in countries where economies are in trouble.
Heard this before . . .
That is EXACTLY what Greenspan said was happening during his 'conundrum' period where the 10 year yield fell below the 2 year yield, indicating recession. Greenspan's Fed was hiking rates and he was questions about that given the short end (more controlled by the Fed) was rising but the long end was not. Greenspan said that was indeed something to ponder, but his great intellect told him that the only reason the inversion appeared was because of foreign buying and thus there was nothing to worry about.
Well, there is ALWAYS foreign buying of US treasuries as a safe haven in any times of worry. More importantly, Greenspan was simply wrong. Whether foreign entities were buying as a safe haven or not, the curve inverted, and as that 2 year/10 year inversion has always indicated, a recession followed. Didn't matter that great minds thought otherwise, that the 'Maestro' explained why it was different this time. It simply was not different this time.
Again, I wish I was smart enough to know that THIS 3 month/10 year inversion was a recession indicator as some are saying. Yes, it certainly inverted ahead of the 2007 crash and recession, but it does not have the same track record as the 2 year/10 year inversion. Indeed, CNBC commented on that after the close.
There is a big top in place.
What I do know is the market rallied from March 2009 to January 2018, then started the current sideways move. Huge rallies don't just roll over in a month or two. A top to a nine year rally takes time. It is currently 16 months in and is just now looking as if it is rolling over: double top, the second top a head and shoulders. Breaking lower now with SP500 gapping below the neckline at 2800. It looks ugly.
Nearer term, it may be so ugly it is good for the upside. An oversold condition can lead to a rebound. The chip slaughter with its 20% drop has some trying to bounce. SP500, NASDAQ undercut the 200 day SMA on the lows then rebounded to show doji. Okay, the stage is set for a possible oversold bounce.
Longer term the downside has not been sated. VIX has yet to bounce - it moved to 19 on the high of the session with the early selling, closing at a meager 17.90. There is no fear at all in this selling. Some say that means the selling has about run its course. If so, it is near term only. If so many are not that concerned about a decline, there are too many holders of stocks in the market in a time of concern. They are not heading for the door, they are just buying puts.
16 month topping action, not a lot of concern for the selling thus far, Fed in neutral but neutral leaning more hawkish, yield curve flashing warning signs, many leadership groups under fire, market still facing distribution sessions. The probabilities the do not favor an end of the selling. After a bounce off the current oversold condition, selling could really intensify.
Indeed, we saw the doji on SP500 and NASDAQ and took some gain on the DXD, QID, TECD positions. Perhaps the doji on those two large cap indices was a continuation doji, i.e. the selling continues off this Wednesday action. Throw in the 200 day SMA, however, then the doji after undercutting that support makes sense. Short covering occurred at that point, bouncing it back up. With some oversold areas trying to bounce, that leads to the oversold bounce before another drop. That of course presents another good entry point downside.
Who wants to bounce? A few for sure, but the list is thin.
Semiconductor big names for one. INTC, XLNX, AMAT. They led lower, they are set to bounce. DELL is interesting though other big techs are not that great (CSCO, ORCL, HPE).
Other areas are not so positive, indeed, playing catch down to the chips: retail is being gutted. Apparel, eateries hammered. Software is trying to break down, e.g. HUBS, WDAY, VMW - though NOW and COUP are not bad.
To be clear, there are more negative patterns than positive patterns. Good patterns are showing up in: social, biotech, some software. Not a lot more.
The list of potential bounce stocks and those in still good patterns is thin. Thus, any bounce is likely just a bounce, a relief move that sets up the next drop lower. With the high volume selling ongoing it is clear the market has not shifted to buying from selling. Just another reason any bounce is highly likely just a bounce.
THURSDAY
While some stocks are really oversold and are ready to bounce after showing indications for the past several sessions (INTC, XLNX, DE), any move higher is highly likely just a relief move.
Why? Even with some oversold stocks prepping to bounce, the market overall continues distributing, i.e. selling on high volume. That means stocks are still being liquidated from portfolios, something we said would be the case after a bounce just as was the case with the 4 to 5 day bounce into mid-May. After that bounce fizzled, sellers started dumping stocks in earnest once more with high volume downside sessions. Tuesday was a nasty distribution session and Wednesday another one - volume a bit lower Wednesday but still much stronger than recent trade.
Can an upside bounce make any money? It can with XLNX and INTC perhaps, DE is a bit tight. Good patterns in biotech are alluring, but one thing you have to consider in a harshly selling market: good patterns can yield good breaks higher, but they tend to run out of gas faster. The goal is to capture a reasonable number of points then exit because so often good upside is sold by the sellers for the audacity of rallying. Those breaks higher just don't hold as long in a market that is overall selling.
Have a great evening!
MARKET STATS
DJ30
Stats: -221.36 points (-0.87%) to close at 25126.41
Nasdaq
Stats: -60.04 points (-0.79%) to close at 7547.31
Volume: 2.39B (-6.64%)
Up Volume: 958.25M (+62.06M)
Down Volume: 1.4B (-230M)
A/D and Hi/Lo: Decliners led 2.23 to 1
Previous Session: Decliners led 1.72 to 1
New Highs: 60 (-19)
New Lows: 219 (+88)
S&P
Stats: -19.37 points (-0.69%) to close at 2783.02
NYSE Volume: 810.971M (-42.93%)
Up Volume: 260.994M (-70.012M)
Down Volume: 537.337M (-528.22M)
A/D and Hi/Lo: Decliners led 2.04 to 1
Previous Session: Decliners led 2.06 to 1
New Highs: 71 (-56)
New Lows: 211 (+103)
SENTIMENT
VIX: 17.90; +0.40
VXN: 22.23; +0.40
VXO: 19.71; +0.46
Put/Call Ratio (CBOE): 1.41; +0.34, 16 of 19 sessions over 1.0. Definitely in the status of providing upside momentum, but the other indicators need to be there. New lows are still low, no mega-negative internals and sentiment.
Bulls and Bears:
Bulls faded farther, falling below 50 with a pretty solid 6 point drop over 3 weeks. Bears fell yet again. Bears lower on selling, VIX not spiking on selling. Appears there are more issues to resolve that this range trading action at the head and shoulders neckline has not been able to rectify.
At this juncture there are still no extremes. Bulls faded from 60 without ever hitting that level. Bears have overall been more complacent of late.
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: Shading to yellow for this week even as bulls backed off. Not in the 60's, but not much fear from the selling.
Bulls: 49.5 versus 51.4 versus 55.5
Bears: 17.2 versus 17.5 versus 17.8
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.
OTHER MARKETS
INTEREST RATES
Threat level: Red-ish. 3 month/10 year spread inverts a third time. 5 year, and 2 year are below the 3 month treasury. Third 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.
The 3 month yield versus the 10 year: Spread climbs 1BP to -10BP.
The 2 year versus the 10 year: Spread rises 1BP to 15BP
10 year: 2.262% versus 2.268%
3 month: 2.362% versus 2.356%
2 year: 2.109% versus 2.127%
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.
The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.
EUR/USD: 1.11362 versus 1.11624. Germany's unemployed jumped and that scared the euros. Euro lower for third session, falling to the support.
Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.
USD/JPY: 109.573 versus 109.377. Bouncing off the 109 support - a bit.
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: 58.81, -0.33. Dropped hard then rebounded to near flat, trying to fight off the bear flag after the sharp drop the prior Thursday.
Gold: 1286.30, +9.20. Gold trying to move up off its lows. It is trying to form a cup, trying to come up off the lows of the base.
End part 1
_______________________________________________________
Member: tweet@investbilling.com
Customer Support: http://www.InvestBilling.com
1153 Bergen Pkwy - Suite I #502 - Evergreen, CO 80439
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5/29/2019 Investment House Daily
* * * *
Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit: DXD; QID; TECD
Entry alerts: None issued
Trailing stops: WDAY
Stop alerts: DRI; TREX
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
https://www.investmenthouse.com/alertdaily.html
********************************************************************
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.
TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
https://investmenthouse1.com/ihmedia/f/ts/ts.mp4
********************************************************************
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.
SUMMARY
- Bond inversion fever still present, still pegged as the reason for the selling. Sure.
- A gap to lower selloff lows, but SP500, NASDAQ show doji at the 200 day SMA.
- Some stocks are so oversold they are ready to bounce, but not in great numbers.
- Upside leaders are thin, so are the stocks set to bounce.
- Doji at support suggests a bounce, but not expecting anything big. VIX has yet to move.
- Upside plays are there but best not to let expectations overshoot reality.
Stocks continue to distribute with a downside gap on top of the Tuesday reversal selloff. Ugly session yet again, but there was a modest move off the lows. Indeed, SP500 and NASDAQ managed to show doji with tail, closing just over the 200 day SMA. After a pretty salty selloff those patterns suggest a possible bounce.
SP500 -19.37, -0.69%
NASDAQ -60.04, -0.79%
DJ30 -221.36, -0.87%
SP400 -0.62%
RUTX -0.94%
SOX 0.41%
NASDAQ 100 -0.85%
VOLUME: NYSE -43%, NASDAQ -7%. Still very strong, above average NASDAQ trade while NYSE trade backed off significantly.
ADVANCE/DECLINE: NYSE -2:1, NASDAQ -2.2:1
Bond inversion fever has again struck the stock market. After ignoring the 3 month and 10 year treasury yield inversions starting over 2 weeks back, suddenly they are important. Is it the yield curve inversions causing the selling, or were investors and traders looking for a reason why there was selling and realized the 3 month/10 year had inverted as it did in March (the first time since 2007)? Ignored for two weeks then after some ugly selling it is suddenly the main reason cited.
Perhaps. Economic slowing worries, trade talks breaking down, Fed still viewing price declines as 'transitory,' stock leaders such as semiconductors selling off hard, oil prices making an important break lower. There are a lot of negative issues out there and the bond curve starting to invert is another stick added to the pile of economic worries.
It is still not accepted across the board that a 3 month/10 year inversion is a recession indicator. One Fed district said it did some research and believes that pair is a reliable recession indicator, as reliable as the accepted 2 year/10 year curve inversion. It has become accepted in the media because it happened in 2007 and a Fed district said so. I wish I was smart enough to know for certain, but I do know that the short end yields are above the 2 year, 5 year and 10 year and that is not a good development. The Fed is being way too cavalier about prices and could find itself in the same situation as Greenspan.
Indeed, one scholar today said it was the 10 year dropping versus the 3 month rising and that makes this different than the kind of inversion indicating recession. In other words, it is not worry that is making money today more valuable versus 2, 5, or 10 years from now, just demand for the 10 year from others such as foreign governments and individuals in countries where economies are in trouble.
Heard this before . . .
That is EXACTLY what Greenspan said was happening during his 'conundrum' period where the 10 year yield fell below the 2 year yield, indicating recession. Greenspan's Fed was hiking rates and he was questions about that given the short end (more controlled by the Fed) was rising but the long end was not. Greenspan said that was indeed something to ponder, but his great intellect told him that the only reason the inversion appeared was because of foreign buying and thus there was nothing to worry about.
Well, there is ALWAYS foreign buying of US treasuries as a safe haven in any times of worry. More importantly, Greenspan was simply wrong. Whether foreign entities were buying as a safe haven or not, the curve inverted, and as that 2 year/10 year inversion has always indicated, a recession followed. Didn't matter that great minds thought otherwise, that the 'Maestro' explained why it was different this time. It simply was not different this time.
Again, I wish I was smart enough to know that THIS 3 month/10 year inversion was a recession indicator as some are saying. Yes, it certainly inverted ahead of the 2007 crash and recession, but it does not have the same track record as the 2 year/10 year inversion. Indeed, CNBC commented on that after the close.
There is a big top in place.
What I do know is the market rallied from March 2009 to January 2018, then started the current sideways move. Huge rallies don't just roll over in a month or two. A top to a nine year rally takes time. It is currently 16 months in and is just now looking as if it is rolling over: double top, the second top a head and shoulders. Breaking lower now with SP500 gapping below the neckline at 2800. It looks ugly.
Nearer term, it may be so ugly it is good for the upside. An oversold condition can lead to a rebound. The chip slaughter with its 20% drop has some trying to bounce. SP500, NASDAQ undercut the 200 day SMA on the lows then rebounded to show doji. Okay, the stage is set for a possible oversold bounce.
Longer term the downside has not been sated. VIX has yet to bounce - it moved to 19 on the high of the session with the early selling, closing at a meager 17.90. There is no fear at all in this selling. Some say that means the selling has about run its course. If so, it is near term only. If so many are not that concerned about a decline, there are too many holders of stocks in the market in a time of concern. They are not heading for the door, they are just buying puts.
16 month topping action, not a lot of concern for the selling thus far, Fed in neutral but neutral leaning more hawkish, yield curve flashing warning signs, many leadership groups under fire, market still facing distribution sessions. The probabilities the do not favor an end of the selling. After a bounce off the current oversold condition, selling could really intensify.
Indeed, we saw the doji on SP500 and NASDAQ and took some gain on the DXD, QID, TECD positions. Perhaps the doji on those two large cap indices was a continuation doji, i.e. the selling continues off this Wednesday action. Throw in the 200 day SMA, however, then the doji after undercutting that support makes sense. Short covering occurred at that point, bouncing it back up. With some oversold areas trying to bounce, that leads to the oversold bounce before another drop. That of course presents another good entry point downside.
Who wants to bounce? A few for sure, but the list is thin.
Semiconductor big names for one. INTC, XLNX, AMAT. They led lower, they are set to bounce. DELL is interesting though other big techs are not that great (CSCO, ORCL, HPE).
Other areas are not so positive, indeed, playing catch down to the chips: retail is being gutted. Apparel, eateries hammered. Software is trying to break down, e.g. HUBS, WDAY, VMW - though NOW and COUP are not bad.
To be clear, there are more negative patterns than positive patterns. Good patterns are showing up in: social, biotech, some software. Not a lot more.
The list of potential bounce stocks and those in still good patterns is thin. Thus, any bounce is likely just a bounce, a relief move that sets up the next drop lower. With the high volume selling ongoing it is clear the market has not shifted to buying from selling. Just another reason any bounce is highly likely just a bounce.
THURSDAY
While some stocks are really oversold and are ready to bounce after showing indications for the past several sessions (INTC, XLNX, DE), any move higher is highly likely just a relief move.
Why? Even with some oversold stocks prepping to bounce, the market overall continues distributing, i.e. selling on high volume. That means stocks are still being liquidated from portfolios, something we said would be the case after a bounce just as was the case with the 4 to 5 day bounce into mid-May. After that bounce fizzled, sellers started dumping stocks in earnest once more with high volume downside sessions. Tuesday was a nasty distribution session and Wednesday another one - volume a bit lower Wednesday but still much stronger than recent trade.
Can an upside bounce make any money? It can with XLNX and INTC perhaps, DE is a bit tight. Good patterns in biotech are alluring, but one thing you have to consider in a harshly selling market: good patterns can yield good breaks higher, but they tend to run out of gas faster. The goal is to capture a reasonable number of points then exit because so often good upside is sold by the sellers for the audacity of rallying. Those breaks higher just don't hold as long in a market that is overall selling.
Have a great evening!
MARKET STATS
DJ30
Stats: -221.36 points (-0.87%) to close at 25126.41
Nasdaq
Stats: -60.04 points (-0.79%) to close at 7547.31
Volume: 2.39B (-6.64%)
Up Volume: 958.25M (+62.06M)
Down Volume: 1.4B (-230M)
A/D and Hi/Lo: Decliners led 2.23 to 1
Previous Session: Decliners led 1.72 to 1
New Highs: 60 (-19)
New Lows: 219 (+88)
S&P
Stats: -19.37 points (-0.69%) to close at 2783.02
NYSE Volume: 810.971M (-42.93%)
Up Volume: 260.994M (-70.012M)
Down Volume: 537.337M (-528.22M)
A/D and Hi/Lo: Decliners led 2.04 to 1
Previous Session: Decliners led 2.06 to 1
New Highs: 71 (-56)
New Lows: 211 (+103)
SENTIMENT
VIX: 17.90; +0.40
VXN: 22.23; +0.40
VXO: 19.71; +0.46
Put/Call Ratio (CBOE): 1.41; +0.34, 16 of 19 sessions over 1.0. Definitely in the status of providing upside momentum, but the other indicators need to be there. New lows are still low, no mega-negative internals and sentiment.
Bulls and Bears:
Bulls faded farther, falling below 50 with a pretty solid 6 point drop over 3 weeks. Bears fell yet again. Bears lower on selling, VIX not spiking on selling. Appears there are more issues to resolve that this range trading action at the head and shoulders neckline has not been able to rectify.
At this juncture there are still no extremes. Bulls faded from 60 without ever hitting that level. Bears have overall been more complacent of late.
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: Shading to yellow for this week even as bulls backed off. Not in the 60's, but not much fear from the selling.
Bulls: 49.5 versus 51.4 versus 55.5
Bears: 17.2 versus 17.5 versus 17.8
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.
OTHER MARKETS
INTEREST RATES
Threat level: Red-ish. 3 month/10 year spread inverts a third time. 5 year, and 2 year are below the 3 month treasury. Third 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.
The 3 month yield versus the 10 year: Spread climbs 1BP to -10BP.
The 2 year versus the 10 year: Spread rises 1BP to 15BP
10 year: 2.262% versus 2.268%
3 month: 2.362% versus 2.356%
2 year: 2.109% versus 2.127%
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.
The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.
EUR/USD: 1.11362 versus 1.11624. Germany's unemployed jumped and that scared the euros. Euro lower for third session, falling to the support.
Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.
USD/JPY: 109.573 versus 109.377. Bouncing off the 109 support - a bit.
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: 58.81, -0.33. Dropped hard then rebounded to near flat, trying to fight off the bear flag after the sharp drop the prior Thursday.
Gold: 1286.30, +9.20. Gold trying to move up off its lows. It is trying to form a cup, trying to come up off the lows of the base.
End part 1
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Tuesday, May 28, 2019
The Daily, Part 1 of 3, 5-28-19
* * * *
5/28/2019 Investment House Daily
* * * *
Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit: None issued
Entry alerts: AMD; DXD; ETN; IBM
Trailing stops: None issued
Stop alerts: None issued
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
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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.
SUMMARY
- Stocks try to alter the start of the week action, but an upside morning rolls over.
- High to low move keeps the market character the same, i.e. downside bias.
- Bond yield curve inversion of the past 3 weeks is suddenly the reason for today's selling.
- Social sin stocks holding up well, AMD jumps, but 'safe' areas such as personal products, utilities break lower.
- Indices hanging on in the same support range but until they can bounce out of here the probabilities are to the downside.
It was not Monday but it was the start of the trading week, and after the prior two Mondays showed ugly gaps lower, it looked as if perhaps the start of the week jinx was off. Surprisingly (not really), a steady build in futures in the premarket session did not hold through the close. Indeed, it only held through the first 15 minutes of trade. The initial move higher was the session peak. When an intraday double bottom test in the morning session broke the double bottom at 2:00ET the selling was on. Stocks pretty much straight-lined lower into the close.
SP500 -23.67, -0.84%
NASDAQ -29.66, -0.39%
DJ30 -237.92, -0.93%
SP400 -1.00%
RUTX -0.55%
SOX -0.89%
NASDAQ 100 -0.31%
VOLUME: NYSE +125%, NASDAQ +45%. Volume exploded upside as stocks started higher but rolled over. Lots of selling. Yet . . . the indices did not break support today.
ADVANCE/DECLINE: NYSE -2.1:1, NASDAQ -1.7:1. Not that horrid, but it was a high to low reversal session and breadth tends to lag on those days.
DJ30 blew 370 points high to close, NASDAQ 87 points from the high. Good moves completely reversed. Again, it looked as if the market might shake off that first of the week curse, but the downside effect was the same with the intraday rollover.
Once again the downside won out as the early bids were used as selling targets for many - though not all - stocks. Interestingly, some big names performed quite well: FB, ADBE, AMD. Others may not have closed higher but put in good work on patterns: MSFT, SNAP, MTCH.
Very interesting was the poor performance of the more classic recession worry stocks, e.g. personal products, utilities, food. PG, CL, PEP, DJ15 (Dow Jones Utilitiy average) really struggled on the session after closing just fine Friday.
Of course the financial stations felt obligated to play 'pin the tail on the selloff' in an effort to rationalize the high to low reversal.
After a couple of weeks of the 3 month treasury flipping back and forth with the 10 year yield from inversion to not to inversion as of last week and Tuesday, that 3 month/10 year inversion was cited today as THE reason for the selling. Okay. You know, the 3 mo/10 year yields were inverted BEFORE the market opened, and even so stocks were rallying. Perhaps buyers awoke to the inversion and decided to sell, but they are not that myopic. Everyone knew the curve was inverted; it is just an easy possible reason for the TV anchors to grab hold of after their favorite market soothsayers sent them an email or text saying the 'reason' for the selling was the inversion. Today it made a difference they tell you. Okay, whatever.
Yield-curve-caused or not, the day was another weak start to a new week pushing the indices again to the lows of the recent ranges with some new closing lows on this selling.
CHARTS
To view, click on the following links:
http://investmenthouse1.com/ihmedia/f/charts/sp500.jpg
http://investmenthouse1.com/ihmedia/f/charts/NASDAQ.jpg
http://investmenthouse1.com/ihmedia/f/charts/DJ30.jpg
http://investmenthouse1.com/ihmedia/f/charts/RUTX.jpg
http://investmenthouse1.com/ihmedia/f/charts/SP400.jpg
http://investmenthouse1.com/ihmedia/f/charts/SOX.jpg
http://investmenthouse1.com/ihmedia/f/charts/nasdaq100.jpg
Once again the indices started a week down though this time they tried to rally first. That almost makes it worse though at least volume was light. Some lower closing lows on a few indices, but no real change of character: holding this lower support, but unable to hold any upside. That does not lend much confidence to the idea they can hold here and bounce.
SP500 closed right on the 2800 level, a lower close over the past 2+ week range, but holding the same support. Not really comforting other than the point that with all the selling and negativity, SP500 is still holding this level. There is something to be said for tenacity, but until the market proves it can bounce well with breadth and volume - and of course actually hold the move - holding support does not change the character or the downside bias.
DJ30 showed similar action, closing below the 200 day SMA for the first time since 3 Mondays back with that nasty gap lower. Holding over the support at 25,200ish, but as with SP500, that is not really anything major as it does not change the overall downside pattern. Has not broken, but the presumption has to be that it does until it proves otherwise.
NASDAQ put in a lower closing low as well, actually closing below the hard gap lower three Mondays prior. After gapping lower last Thursday, unlike the early May gap lower, this one has been unable to mount any kind of bounce, or at least a bounce that held beyond the first hour of trade.
SOX put in a lower closing low on the selling but it did manage to hold the early March low, a fairly important support level at 1300. Nice round number with many touches from above, below, and showing gaps through it. Has not broken it yet after losing over 300 points (19%) from the late April all-time high. That puts SOX just over the 61% Fibonacci retracement of the December to late April rally. No wonder it is attempting to make a stand here.
SP400 midcaps broke below the Thursday low, closing at the mid-March intraday low. Unable to rebound at all from the Thursday gap lower and looking ready to find the next support around 1800 (closed at 1844).
RUTX (Russell 2000) small caps actually held over last week's lows and the 1500ish level that is for now acting as some support. That is not bad in such a weak tape, but it likely cannot hold the move once the 10 day EMA catches down to the price. It appears the 10 day EMA is going to continue acting as the downside catalyst for the small caps in the foreseeable near term. That is a funny phrase but it is pretty accurate.
LEADERSHIP
As noted earlier, some surprisingly solid action from some big names while the market overall struggled at best. At the same time, however, some groups that were solid enough sold, e.g. personal products, food.
Social: I still believe these are the new 'sin' stocks as discussed in the weekend report: pack all your troubles in your FB/SNAP posts and then smile, smile, smile after your MTCH hookup. Not surging, but there was some solid upside and the patterns held well. FB up on strong, quite solid volume. SNAP holding well in its pattern, showing excellent volume. MTCH still in an excellent flag pullback. TWTR similar to FB, working on a nice pattern.
Healthcare/Drugs/biotech: Healthcare plans, after a good week last week, started this one poorly, e.g. UNH, HUM. Biotech held up rather well, however, e.g. ARNA, CMRX, PTCT. DGX holding up well. As a group, still good patterns.
Building materials: After a good close to last week by TREX, MHK, they both sold back. VMC, USCR, already testing, held up well enough.
Personal products: After a decent close last week they were sold today, e.g. CL, PG - and sold on volume with drops to the 50 day MA. This is where they have held since January, so a very key test.
Software: Still hanging in well though closing off the highs, e.g. COUP, HUBS, WDAY. WDAY reported afterhours and surged to 220, but then sold back to flat with the close. ACN, a downside play, hung in very well as did NOW.
Machinery/Manufacturing: Selling again this week and we picked up some ETN puts. EMR down hard as well, MMM selling to a new selloff low. CAT, DE down but more of the same of late.
Transports: Rails outside of CSX were fine (KSU, NSC). Truckers hammered, e.g. WERN, JBHT, ODFL. LUV downgraded and sold but not crushed. DAL, AAL holding the recent ranges, but that does not make them beauties.
Semiconductors: AMD was solid all session. The rest were crappy. MU (-3%), MXIM, LRCX, TXN (broke 200 day MA). XLNX, down before most, is holding the 200 day SMA with a doji.
MARKET STATS
DJ30
Stats: -237.92 points (-0.93%) to close at 25347.77
Nasdaq
Stats: -29.66 points (-0.39%) to close at 7607.35
Volume: 2.56B (+44.63%)
Up Volume: 896.19M (-113.81M)
Down Volume: 1.63B (+904.32M)
A/D and Hi/Lo: Decliners led 1.72 to 1
Previous Session: Advancers led 1.91 to 1
New Highs: 79 (+25)
New Lows: 131 (+25)
S&P
Stats: -23.67 points (-0.84%) to close at 2802.39
NYSE Volume: 1.421B (+125.07%)
Up Volume: 331.005M (-48.207M)
Down Volume: 1.066B (+831.897M)
A/D and Hi/Lo: Decliners led 2.06 to 1
Previous Session: Advancers led 2.1 to 1
New Highs: 127 (-2)
New Lows: 108 (+22)
SENTIMENT
VIX: 17.50; +1.65
VXN: 21.83; +1.20
VXO: 19.25; +1.24
Put/Call Ratio (CBOE): 1.07; +0.11. Blasting back over 1.0 on the close. Only 3 sessions below 1.0 in the last 18.
Bulls and Bears:
Bulls faded farther, falling below 50 with a pretty solid 6 point drop over 3 weeks. Bears fell yet again. Bears lower on selling, VIX not spiking on selling. Appears there are more issues to resolve that this range trading action at the head and shoulders neckline has not been able to rectify.
At this juncture there are still no extremes. Bulls faded from 60 without ever hitting that level. Bears have overall been more complacent of late.
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: Shading to yellow for this week even as bulls backed off. Not in the 60's, but not much fear from the selling.
Bulls: 49.5 versus 51.4 versus 55.5
Bears: 17.2 versus 17.5 versus 17.8
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.
OTHER MARKETS
INTEREST RATES
Threat level: Red-ish. 3 month/10 year spread inverts a third time. 5 year, and 2 year are below the 3 month treasury. Third 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.
Today, suddenly, after 3 weeks of inversions back and forth, the 3 month/10 year inversion because 'the issue' for the market and was the explanation for the selling. Of course, stocks were up early even with another inverted curve. Dubious causation there, at least for it starting JUST today. Perhaps this has been percolating in the market since it started again.
The 3 month yield versus the 10 year: Spread inverts the most since August 2007, up 6BP to -9BP.
The 2 year versus the 10 year: Spread falls 1BP to 14BP
10 year: 2.268% versus 2.324%. Crushed yield as the 10 year surged
3 month: 2.356% versus 2.349%
2 year: 2.127% versus 2.168%
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.
The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.
EUR/USD: 1.11624 versus 1.12054. Falling into the 'new' range, the one of the past 6 weeks, that sees the pair in the 1.11 versus 1.12 range.
Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.
USD/JPY: 109.377 versus 109.29. Holding the earlier May low for a fourth session, trying to put in a second bottom.
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: 59.14, +0.51. 2-day bear flag, likely rebounds a bit more to 60 and puts in a 1-2-3 bear flag that sends it lower again.
Gold: 1277.10, -6.50. Faded, but still in the 3-month base with 1270ish as support.
WEDNESDAY
A short week - as if you did not know. Tuesday did nothing to change the market character, i.e. bias downside. The indices are still holding the same ranges, but as noted, they have to show they can bounce out of here or else the probabilities say a move lower.
Now, each weak start to a week of late has been bought in a rebound. That could happen here, but not counting on that same pattern to hold.
Why not? More defensive groups were hit Tuesday after holding nice uptrends (e.g. personal products, utilities). Recall our discussion of WHY the market has managed to hold this support despite the weakness in growth and in the overall chart patterns: the more stoic, staid, 'old economy' stocks were rallying. If they start breaking their uptrends and patterns, then there is nothing to hold the indices in the ranges in the right shoulder to the head and shoulders pattern that is the second top to the index double tops.
Thus, we bought some QID Friday, bought some DXD today along with other downside plays. Okay, we bought some upside on AMD as well, but it was very solid.
All you can say right now is that there are groups holding up well, e.g. social, software not bad, but most groups are struggling to downright selling. The indices have overall bearish patterns formed over the past 1.5 years after 9 years of rallying. Big rallies usually need big tops to stop the advance. That is happening right now.
The Fed will not see this, indeed its commentary says it does not. It is fighting the last battles of the last war, i.e. the war against possible inflation in an expanding market and economy. That is not happening now, and the Fed has been AT LEAST complicit and likely THE CAUSE of the slowdown. It hiked when it should not have hiked, and now it won't take them back when the yield curve is SCREAMING for the Fed to do so. While the 10 year/2 year has not inverted - the traditional bond market indication of a recession - by the time it does, that is too late. That is why these preliminary bond moves and obvious stock market index patterns and leadership rollovers are classic indications the Fed simply does not use. The cause and effect is there, but the Fed believes in the Phillips Curve and its incorrect hypotheses. Even if it worked, by the time it shows the trouble it is too late to fix things.
That is our analysis of where we are. It is not pleasant for the upside, particularly with the personal products and utilities suddenly selling. That is why the past two weekends we talked of getting comfortable playing the downside because that looks as if it is where the majority of the action will be - at least that is what the probabilities say. The market can do whatever it wants, so it has the final word.
We prepare, however, for the likely probable moves and thus are ready to make the plays. Those probabilities include upside - just because we think the bias is negative and the likely move is lower, that does not make it so. With good upside patterns in social and other stocks, that tells you there is still money going into some stocks. They could be the sparks that turn the tide. Perhaps also 20% downside in SOX is enough to turn it. If SOX and by extension chips turn upside, the market benefits upside as well.
Thus, we have upside and downside plays and will continue looking at both until it is clear one side has taken over. Not just threatening to do so, but does so, changing the character from bias downside to downside.
Have a great evening!
End part 1 of 3
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5/28/2019 Investment House Daily
* * * *
Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit: None issued
Entry alerts: AMD; DXD; ETN; IBM
Trailing stops: None issued
Stop alerts: None issued
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
https://www.investmenthouse.com/alertdaily.html
********************************************************************
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.
SUMMARY
- Stocks try to alter the start of the week action, but an upside morning rolls over.
- High to low move keeps the market character the same, i.e. downside bias.
- Bond yield curve inversion of the past 3 weeks is suddenly the reason for today's selling.
- Social sin stocks holding up well, AMD jumps, but 'safe' areas such as personal products, utilities break lower.
- Indices hanging on in the same support range but until they can bounce out of here the probabilities are to the downside.
It was not Monday but it was the start of the trading week, and after the prior two Mondays showed ugly gaps lower, it looked as if perhaps the start of the week jinx was off. Surprisingly (not really), a steady build in futures in the premarket session did not hold through the close. Indeed, it only held through the first 15 minutes of trade. The initial move higher was the session peak. When an intraday double bottom test in the morning session broke the double bottom at 2:00ET the selling was on. Stocks pretty much straight-lined lower into the close.
SP500 -23.67, -0.84%
NASDAQ -29.66, -0.39%
DJ30 -237.92, -0.93%
SP400 -1.00%
RUTX -0.55%
SOX -0.89%
NASDAQ 100 -0.31%
VOLUME: NYSE +125%, NASDAQ +45%. Volume exploded upside as stocks started higher but rolled over. Lots of selling. Yet . . . the indices did not break support today.
ADVANCE/DECLINE: NYSE -2.1:1, NASDAQ -1.7:1. Not that horrid, but it was a high to low reversal session and breadth tends to lag on those days.
DJ30 blew 370 points high to close, NASDAQ 87 points from the high. Good moves completely reversed. Again, it looked as if the market might shake off that first of the week curse, but the downside effect was the same with the intraday rollover.
Once again the downside won out as the early bids were used as selling targets for many - though not all - stocks. Interestingly, some big names performed quite well: FB, ADBE, AMD. Others may not have closed higher but put in good work on patterns: MSFT, SNAP, MTCH.
Very interesting was the poor performance of the more classic recession worry stocks, e.g. personal products, utilities, food. PG, CL, PEP, DJ15 (Dow Jones Utilitiy average) really struggled on the session after closing just fine Friday.
Of course the financial stations felt obligated to play 'pin the tail on the selloff' in an effort to rationalize the high to low reversal.
After a couple of weeks of the 3 month treasury flipping back and forth with the 10 year yield from inversion to not to inversion as of last week and Tuesday, that 3 month/10 year inversion was cited today as THE reason for the selling. Okay. You know, the 3 mo/10 year yields were inverted BEFORE the market opened, and even so stocks were rallying. Perhaps buyers awoke to the inversion and decided to sell, but they are not that myopic. Everyone knew the curve was inverted; it is just an easy possible reason for the TV anchors to grab hold of after their favorite market soothsayers sent them an email or text saying the 'reason' for the selling was the inversion. Today it made a difference they tell you. Okay, whatever.
Yield-curve-caused or not, the day was another weak start to a new week pushing the indices again to the lows of the recent ranges with some new closing lows on this selling.
CHARTS
To view, click on the following links:
http://investmenthouse1.com/ihmedia/f/charts/sp500.jpg
http://investmenthouse1.com/ihmedia/f/charts/NASDAQ.jpg
http://investmenthouse1.com/ihmedia/f/charts/DJ30.jpg
http://investmenthouse1.com/ihmedia/f/charts/RUTX.jpg
http://investmenthouse1.com/ihmedia/f/charts/SP400.jpg
http://investmenthouse1.com/ihmedia/f/charts/SOX.jpg
http://investmenthouse1.com/ihmedia/f/charts/nasdaq100.jpg
Once again the indices started a week down though this time they tried to rally first. That almost makes it worse though at least volume was light. Some lower closing lows on a few indices, but no real change of character: holding this lower support, but unable to hold any upside. That does not lend much confidence to the idea they can hold here and bounce.
SP500 closed right on the 2800 level, a lower close over the past 2+ week range, but holding the same support. Not really comforting other than the point that with all the selling and negativity, SP500 is still holding this level. There is something to be said for tenacity, but until the market proves it can bounce well with breadth and volume - and of course actually hold the move - holding support does not change the character or the downside bias.
DJ30 showed similar action, closing below the 200 day SMA for the first time since 3 Mondays back with that nasty gap lower. Holding over the support at 25,200ish, but as with SP500, that is not really anything major as it does not change the overall downside pattern. Has not broken, but the presumption has to be that it does until it proves otherwise.
NASDAQ put in a lower closing low as well, actually closing below the hard gap lower three Mondays prior. After gapping lower last Thursday, unlike the early May gap lower, this one has been unable to mount any kind of bounce, or at least a bounce that held beyond the first hour of trade.
SOX put in a lower closing low on the selling but it did manage to hold the early March low, a fairly important support level at 1300. Nice round number with many touches from above, below, and showing gaps through it. Has not broken it yet after losing over 300 points (19%) from the late April all-time high. That puts SOX just over the 61% Fibonacci retracement of the December to late April rally. No wonder it is attempting to make a stand here.
SP400 midcaps broke below the Thursday low, closing at the mid-March intraday low. Unable to rebound at all from the Thursday gap lower and looking ready to find the next support around 1800 (closed at 1844).
RUTX (Russell 2000) small caps actually held over last week's lows and the 1500ish level that is for now acting as some support. That is not bad in such a weak tape, but it likely cannot hold the move once the 10 day EMA catches down to the price. It appears the 10 day EMA is going to continue acting as the downside catalyst for the small caps in the foreseeable near term. That is a funny phrase but it is pretty accurate.
LEADERSHIP
As noted earlier, some surprisingly solid action from some big names while the market overall struggled at best. At the same time, however, some groups that were solid enough sold, e.g. personal products, food.
Social: I still believe these are the new 'sin' stocks as discussed in the weekend report: pack all your troubles in your FB/SNAP posts and then smile, smile, smile after your MTCH hookup. Not surging, but there was some solid upside and the patterns held well. FB up on strong, quite solid volume. SNAP holding well in its pattern, showing excellent volume. MTCH still in an excellent flag pullback. TWTR similar to FB, working on a nice pattern.
Healthcare/Drugs/biotech: Healthcare plans, after a good week last week, started this one poorly, e.g. UNH, HUM. Biotech held up rather well, however, e.g. ARNA, CMRX, PTCT. DGX holding up well. As a group, still good patterns.
Building materials: After a good close to last week by TREX, MHK, they both sold back. VMC, USCR, already testing, held up well enough.
Personal products: After a decent close last week they were sold today, e.g. CL, PG - and sold on volume with drops to the 50 day MA. This is where they have held since January, so a very key test.
Software: Still hanging in well though closing off the highs, e.g. COUP, HUBS, WDAY. WDAY reported afterhours and surged to 220, but then sold back to flat with the close. ACN, a downside play, hung in very well as did NOW.
Machinery/Manufacturing: Selling again this week and we picked up some ETN puts. EMR down hard as well, MMM selling to a new selloff low. CAT, DE down but more of the same of late.
Transports: Rails outside of CSX were fine (KSU, NSC). Truckers hammered, e.g. WERN, JBHT, ODFL. LUV downgraded and sold but not crushed. DAL, AAL holding the recent ranges, but that does not make them beauties.
Semiconductors: AMD was solid all session. The rest were crappy. MU (-3%), MXIM, LRCX, TXN (broke 200 day MA). XLNX, down before most, is holding the 200 day SMA with a doji.
MARKET STATS
DJ30
Stats: -237.92 points (-0.93%) to close at 25347.77
Nasdaq
Stats: -29.66 points (-0.39%) to close at 7607.35
Volume: 2.56B (+44.63%)
Up Volume: 896.19M (-113.81M)
Down Volume: 1.63B (+904.32M)
A/D and Hi/Lo: Decliners led 1.72 to 1
Previous Session: Advancers led 1.91 to 1
New Highs: 79 (+25)
New Lows: 131 (+25)
S&P
Stats: -23.67 points (-0.84%) to close at 2802.39
NYSE Volume: 1.421B (+125.07%)
Up Volume: 331.005M (-48.207M)
Down Volume: 1.066B (+831.897M)
A/D and Hi/Lo: Decliners led 2.06 to 1
Previous Session: Advancers led 2.1 to 1
New Highs: 127 (-2)
New Lows: 108 (+22)
SENTIMENT
VIX: 17.50; +1.65
VXN: 21.83; +1.20
VXO: 19.25; +1.24
Put/Call Ratio (CBOE): 1.07; +0.11. Blasting back over 1.0 on the close. Only 3 sessions below 1.0 in the last 18.
Bulls and Bears:
Bulls faded farther, falling below 50 with a pretty solid 6 point drop over 3 weeks. Bears fell yet again. Bears lower on selling, VIX not spiking on selling. Appears there are more issues to resolve that this range trading action at the head and shoulders neckline has not been able to rectify.
At this juncture there are still no extremes. Bulls faded from 60 without ever hitting that level. Bears have overall been more complacent of late.
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: Shading to yellow for this week even as bulls backed off. Not in the 60's, but not much fear from the selling.
Bulls: 49.5 versus 51.4 versus 55.5
Bears: 17.2 versus 17.5 versus 17.8
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.
OTHER MARKETS
INTEREST RATES
Threat level: Red-ish. 3 month/10 year spread inverts a third time. 5 year, and 2 year are below the 3 month treasury. Third 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.
Today, suddenly, after 3 weeks of inversions back and forth, the 3 month/10 year inversion because 'the issue' for the market and was the explanation for the selling. Of course, stocks were up early even with another inverted curve. Dubious causation there, at least for it starting JUST today. Perhaps this has been percolating in the market since it started again.
The 3 month yield versus the 10 year: Spread inverts the most since August 2007, up 6BP to -9BP.
The 2 year versus the 10 year: Spread falls 1BP to 14BP
10 year: 2.268% versus 2.324%. Crushed yield as the 10 year surged
3 month: 2.356% versus 2.349%
2 year: 2.127% versus 2.168%
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.
The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.
EUR/USD: 1.11624 versus 1.12054. Falling into the 'new' range, the one of the past 6 weeks, that sees the pair in the 1.11 versus 1.12 range.
Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.
USD/JPY: 109.377 versus 109.29. Holding the earlier May low for a fourth session, trying to put in a second bottom.
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: 59.14, +0.51. 2-day bear flag, likely rebounds a bit more to 60 and puts in a 1-2-3 bear flag that sends it lower again.
Gold: 1277.10, -6.50. Faded, but still in the 3-month base with 1270ish as support.
WEDNESDAY
A short week - as if you did not know. Tuesday did nothing to change the market character, i.e. bias downside. The indices are still holding the same ranges, but as noted, they have to show they can bounce out of here or else the probabilities say a move lower.
Now, each weak start to a week of late has been bought in a rebound. That could happen here, but not counting on that same pattern to hold.
Why not? More defensive groups were hit Tuesday after holding nice uptrends (e.g. personal products, utilities). Recall our discussion of WHY the market has managed to hold this support despite the weakness in growth and in the overall chart patterns: the more stoic, staid, 'old economy' stocks were rallying. If they start breaking their uptrends and patterns, then there is nothing to hold the indices in the ranges in the right shoulder to the head and shoulders pattern that is the second top to the index double tops.
Thus, we bought some QID Friday, bought some DXD today along with other downside plays. Okay, we bought some upside on AMD as well, but it was very solid.
All you can say right now is that there are groups holding up well, e.g. social, software not bad, but most groups are struggling to downright selling. The indices have overall bearish patterns formed over the past 1.5 years after 9 years of rallying. Big rallies usually need big tops to stop the advance. That is happening right now.
The Fed will not see this, indeed its commentary says it does not. It is fighting the last battles of the last war, i.e. the war against possible inflation in an expanding market and economy. That is not happening now, and the Fed has been AT LEAST complicit and likely THE CAUSE of the slowdown. It hiked when it should not have hiked, and now it won't take them back when the yield curve is SCREAMING for the Fed to do so. While the 10 year/2 year has not inverted - the traditional bond market indication of a recession - by the time it does, that is too late. That is why these preliminary bond moves and obvious stock market index patterns and leadership rollovers are classic indications the Fed simply does not use. The cause and effect is there, but the Fed believes in the Phillips Curve and its incorrect hypotheses. Even if it worked, by the time it shows the trouble it is too late to fix things.
That is our analysis of where we are. It is not pleasant for the upside, particularly with the personal products and utilities suddenly selling. That is why the past two weekends we talked of getting comfortable playing the downside because that looks as if it is where the majority of the action will be - at least that is what the probabilities say. The market can do whatever it wants, so it has the final word.
We prepare, however, for the likely probable moves and thus are ready to make the plays. Those probabilities include upside - just because we think the bias is negative and the likely move is lower, that does not make it so. With good upside patterns in social and other stocks, that tells you there is still money going into some stocks. They could be the sparks that turn the tide. Perhaps also 20% downside in SOX is enough to turn it. If SOX and by extension chips turn upside, the market benefits upside as well.
Thus, we have upside and downside plays and will continue looking at both until it is clear one side has taken over. Not just threatening to do so, but does so, changing the character from bias downside to downside.
Have a great evening!
End part 1 of 3
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Tuesday, May 21, 2019
Market Alert - CORRECTION CRM
Alert sent early. NOT entering yet.
______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
Alert Key
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______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
Alert Key
http://www.investmenthouse.com/alertkey.htm
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Market Alert - PreMarket
Futures vs FV: SP +17.32; DJ +153.10; NASDAQ +58.55
Futures started higher in the last hour Monday, continued to edge higher in afterhours trade, and jumped more starting 5:00ET on word that the Administration is easing the Huawei ban until 8/19 for specific items. Futures hit a peak at 7:00ET, faded, rebounded to match those levels with DJ30 up near 200. As the open has neared, however, futures are backing off.
Trade: Huawei easing deals with maintaining existing broadband networks and security updates for existing handsets. As a result, GOOG lifted its restrictions, retying the ties that were severed Monday. The chip stocks most directly involved (SWKS, AVGO, TXN, XLNX et al) are rebounding 2% or so. This is likely just a temporary fix; it does not solve the trade impasse, but hope springs eternal and some see it as an easing to try and keep negotiations going. No. This is a practical adjustment to keep people in the US from losing services.
Yuan is near 7.0, deemed a critical level by those claiming to be experts. Below this level Chinese asset prices fall.
BA: China Eastern airline asks BA for compensation for grounded 737 Max planes. You knew this was coming.
South Korea: Exports -11%, chip exports -33%.
AVGO: Under investigation in the US re chip sales. Kind of vague at this point but it does not look good.
Turkey: cuts interest rates as inflation surges. Of course the lira dives lower. Bizarre leader, bizarre policies, predictable results.
TSLA: MS says worst case scenario the stock is $10. Why not $1?
Earnings beats: HD; AZO
Misses: KSS (BL); JCP (BL)
BA: Jumps a bit on reports that a bird strike may have caused Ethiopian airline crash.
OTHER MARKETS
Bonds: 2.43% vs 2.416% 10 year
EUR/USD: 1.1156, -0.0014
USD/JPY: 110.50, +0.46
Oil: 63.35, +0.25
Gold: 1271.50, -5.80
Futures have backed off the highs considerably. The steady rise from the Monday close suggests a steady bid, but commentators are stating this rise is false, it is driven by an adjustment in strategy that is nothing more than a temporary adjustment to again give those providing products and services to switch to other providers.
That is the message US companies need to take to heart: get out of China. There will be no deal that really is a deal unless China is on the verge of economic collapse and it capitulates just to survive. Again, the message, as the house in Amityville Horror said, is 'get out!'
Near term the chips are jumping on the policy adjustment. We have downside on SWKS and AVGO and AAPL. Will have to see how they react at the stop points. This could be a short-lived event but we don't want to get in a protracted test.
New positions? The market was getting oversold and prepping for a bounce -- talked about that last night. The Huawei adjustment is acting as a trigger for that bounce. Stocks that remained in good position are candidates and we put some more of those on the report last night: they held up in the selling, kept their patterns, and thus are solid candidates to play upside.
______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
Alert Key
http://www.investmenthouse.com/alertkey.htm
PLEASE DO NOT REPLY TO THIS EMAIL. USE THE CONTACT US PAGE ON OUR WEBSITE.
Customer Support: http://investmenthouse.com/contact_us.php
Futures started higher in the last hour Monday, continued to edge higher in afterhours trade, and jumped more starting 5:00ET on word that the Administration is easing the Huawei ban until 8/19 for specific items. Futures hit a peak at 7:00ET, faded, rebounded to match those levels with DJ30 up near 200. As the open has neared, however, futures are backing off.
Trade: Huawei easing deals with maintaining existing broadband networks and security updates for existing handsets. As a result, GOOG lifted its restrictions, retying the ties that were severed Monday. The chip stocks most directly involved (SWKS, AVGO, TXN, XLNX et al) are rebounding 2% or so. This is likely just a temporary fix; it does not solve the trade impasse, but hope springs eternal and some see it as an easing to try and keep negotiations going. No. This is a practical adjustment to keep people in the US from losing services.
Yuan is near 7.0, deemed a critical level by those claiming to be experts. Below this level Chinese asset prices fall.
BA: China Eastern airline asks BA for compensation for grounded 737 Max planes. You knew this was coming.
South Korea: Exports -11%, chip exports -33%.
AVGO: Under investigation in the US re chip sales. Kind of vague at this point but it does not look good.
Turkey: cuts interest rates as inflation surges. Of course the lira dives lower. Bizarre leader, bizarre policies, predictable results.
TSLA: MS says worst case scenario the stock is $10. Why not $1?
Earnings beats: HD; AZO
Misses: KSS (BL); JCP (BL)
BA: Jumps a bit on reports that a bird strike may have caused Ethiopian airline crash.
OTHER MARKETS
Bonds: 2.43% vs 2.416% 10 year
EUR/USD: 1.1156, -0.0014
USD/JPY: 110.50, +0.46
Oil: 63.35, +0.25
Gold: 1271.50, -5.80
Futures have backed off the highs considerably. The steady rise from the Monday close suggests a steady bid, but commentators are stating this rise is false, it is driven by an adjustment in strategy that is nothing more than a temporary adjustment to again give those providing products and services to switch to other providers.
That is the message US companies need to take to heart: get out of China. There will be no deal that really is a deal unless China is on the verge of economic collapse and it capitulates just to survive. Again, the message, as the house in Amityville Horror said, is 'get out!'
Near term the chips are jumping on the policy adjustment. We have downside on SWKS and AVGO and AAPL. Will have to see how they react at the stop points. This could be a short-lived event but we don't want to get in a protracted test.
New positions? The market was getting oversold and prepping for a bounce -- talked about that last night. The Huawei adjustment is acting as a trigger for that bounce. Stocks that remained in good position are candidates and we put some more of those on the report last night: they held up in the selling, kept their patterns, and thus are solid candidates to play upside.
______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
Alert Key
http://www.investmenthouse.com/alertkey.htm
PLEASE DO NOT REPLY TO THIS EMAIL. USE THE CONTACT US PAGE ON OUR WEBSITE.
Customer Support: http://investmenthouse.com/contact_us.php
Monday, May 20, 2019
The Daily, Part 1, 5-20-19
* * * *
5/20/2019 Investment House Daily
* * * *
Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit: AVGO
Entry alerts: None issued
Trailing stops: None issued
Stop alerts: AMAT
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
https://www.investmenthouse.com/alertdaily.html
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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.
TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
https://investmenthouse1.com/ihmedia/f/mo/mo.mp4
TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
https://investmenthouse1.com/ihmedia/f/ts/ts.mp4
TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
https://investmenthouse1.com/ihmedia/f/nxt/nxt.mp4
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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
- Growth hit as tech companies have to cut off Huawei
- All indices gap lower, SOX gaps to the next level as NASDAQ approaches next potential support.
- Fed again thinking it is smarter than the markets.
- Fighting a trade war is the result of failed central bank policies, the same failed policies it used to cause other catastrophes.
- Chips are so ugly they may be ready to bounce already.
- With the distribution, any bounce is just a bounce. Still.
The Wednesday and Thursday bounce that stalled Friday turned back into selling Monday, the same as the prior week. I suppose you could say the market is showing a series of 'gray Mondays.' In any event gaps lower across the board for the stock indices, but growth clearly got the worst of it.
SP500 -19.30, -0.67%
NASDAQ -113.90, -1.46%
DJ30 -84.10, -0.33%
SP400 -0.73%
RUTX -0.70%
SOX -4.02%
NASDAQ 100 -1.69%
VOLUME: NYSE -11%, NASDAQ -2%. NYSE trade fell well below average, further indication the selling was not that heavy or aggressive on SP500 and DJ30. NASDAQ trade remained above average, still showing overall aggressive selling.
ADVANCE/DECLINE: NYSE -2:1, NASDAQ -1.8:1. Large cap tech selling for the most part.
Tech was the focus once again as trade issues remain front burner. As a result of the black listing of Huawei, several US companies cut ties. GOOG cut licenses to Android while INTC pulled its products as well. NKE and other shoe makers are complaining they cannot move fast enough, that shoes are different from 'apparel,' and that the year for them was not enough to relocate production.
China hinted at retaliation with rare earths, something that could bite. We all knew China was buying up and locking down all the rare earths it could over the past 15 years. Saving for a rainy day I supposed. Thus, China said it was in 'no rush' to resume the trade talks. What did the US do in that 15 years? Not much. Printed several trillion dollars at the Fed.
Speaking of the Fed, the Atlanta Fed governor said he wasn't sure what the market was looking at because he certainly did not see a rate cut in 2019. Ah, a member of the Fed who knows more than the markets. Danger, danger, danger. But then again, that is why the Fed is ALWAYS wrong: it is a small group of people who think they know more than markets. Or not. They likely just are there to keep the status quo, i.e. the super rich super rich.
GS said a tariff on all Chinese goods would lop off 6% from corporate profits. I am assuming that was US corporate profits and GS was not worrying over Chinese profits.
You know, all this started in 2000. We are now paying the price for Greenspan's actions in starting the massive Fed put. Without going into too much detail yet again, Greenspan was convinced the 'runaway consumer' and high wages would trigger inflation in our strong economy that was still riding the 20 year boom. Well, he ended up draining all liquidity from the economy after flooding it with liquidity ahead of the Y2K non-event. On top of that he aggressively hiked rates. Indeed, after NASDAQ had rolled over violently he added another 50BP rate hike.
Wow, talk about history repeating. The 1929 central bank was on the same inflation snipe hunt, convinced that the roaring twenties brought about by new tech (radio) would cause huge inflation spikes. It hiked and hiked and finally hiked a full 100BP. The market collapsed, the US and world economies followed. Hmm. I guess it beat inflation because it never showed up; just a Great Depression.
The tragedy we are paying for now is the loss of millions of tech jobs the 3 years after Greenspan blew up the tech boom. No investment was made in the US - trillions were lost in the collapse, millions thrown out of work, no investment in tech was believed safe. Instead it all moved overseas. Those jobs were lost and are never coming back. We gave away our tech advantage because people who thought they were smarter than markets blew up those markets over worries of inflation that was not present.
Now we are fighting a trade war to win back our technological advantage and not have it stolen from us again. It is not fun, it is not easy, but if the US is to maintain economic power and the dollar as the reserve currency, it must be done. Decades of weak Presidents and head in the sand congresses have put us here. I have said it often: digging out of a hole is a lot harder than staying out of it in the first place.
CHARTS
Everything gapped lower, SP500 and DJ30 just a bit (relatively), while NASDAQ, SOX and company gapped down to next potential support. Potential because in selling events all support levels are potential until proven. At least NASDAQ and SOX are again at a potential support point.
SOX was hammered again, gapping through the support where it closed Friday and now near the 200 day SMA. On the weekly chart it is not a total disaster as it is holding over the 200 day and is in the upper reaches of the prior range, but it is making things more difficult. That said, what doesn't kill you . . . Okay, reload and reset as SOX has yet another support range to try and hold.
NASDAQ was hit with a strong gap lower as well, closing near 7700 with a doji and just over last week's lows. 7650 represents, more or less, the neckline of a potential head and shoulders pattern from early March.
SP400 gapped to last week's low - Monday - showing a doji and also just over the potential neckline to a head and shoulders pattern.
RUTX shows the same action, gapping to last week's low, holding there on the close.
SP500 gapped to a doji as well, but it was nowhere near last week's low. That doesn't get it off the hook for the downside, it just was not lit up as were the tech stocks.
DJ30 sold but quite modestly, holding over the 200 day SMA and the potential neckline in its own 3 month potential head and shoulders.
LEADERSHIP
Tech was the clear loser - again - while more staid and stoic areas such as aerospace/defense, food, restaurants, some retail, personal products either gained or held their own.
Software struggled again, chips were slammed. The silver lining? Perhaps they are so beaten down they are ready to bounce. Yes, it is pretty soon, but after another blowdown through near support enough sellers could be flushed out.
Software: NOW gapped to the 20 day EMA, WDAY fell to near the 20 day EMA, ADBE gapped to near the 50 day MA. VMW cracked the 20 day EMA. COUP, WDAY, TWLO holding nicely at the 10 day EMA. MSFT not bad with a doji test of the 20 day MA. Feeling some pressure for sure, but most still holding up.
FAANG: FB gapped lower, holding over the 50 day MA where it tested last week and bounced. Okay, double bottom perhaps? Or is that just hope? AAPL gapped to a lower selloff low; did manage to come back from near 180 on the low. AMZN gapped and doji-tapped the 50 day MA on the low before rebounding decently. NFLX gapped down from the 50 day MA test, still just over the bottom of its range. GOOG gapped and sat on the 200 day SMA with a 2% loss.
Aerospace: LMT solid, LLL holding the move higher.
Food: PEP in a modest test. KO in a decent 10 day EMA test. DRI broke higher from a 7 week base with some strong volume. WING was dubbed overbought by one of the afterhours 'gurus.'
Personal products: Some pausing from PG, CL.
Retail: ULTA is trying to bounce from the 50 day MA, showing good volume. COST still solid, adding more upside. BBY hanging on at the 200 day - for now. ROST not bad. TSCO in in a really nice flag test of the 50 day MA. Some retail is working well.
Big tech: CSCO still holding up well, but ORCL is trying to break support while HPE looks ready to roll over in a bear flag.
Financials: V and MA still look great. Banks still look problematic at best, e.g. C, BAC.
Social: MTCH doji testing over the 10 day EMA. TWTR showing a doji at the upper gap point. SNAP holding the 50 day MA after a nice rebound last week. FB gapped to a doji over the 50 day MA - may be getting ready.
Semiconductors: LRCX gapped through the 50 day and sold hard. XLNX gapped lower, tapped the 200 day SMA on the low, showing a doji - perhaps ready to bounce. MU gapped down 4% to a doji. AMAT gapped lower and sold hard; earnings were good last week but could not hold it up. CY gapped and sold to near the 200 day SMA. QRVO, SWKS, AVGO all gapped lower. A circus of ugly that may be so ugly it yields a bounce.
MARKET STATS
DJ30
Stats: -84.10 points (-0.33%) to close at 25679.90
Nasdaq
Stats: -113.90 points (-1.46%) to close at 7702.38
Volume: 2.21B (-1.78%)
Up Volume: 609.93M (-124.08M)
Down Volume: 1.56B (+60M)
A/D and Hi/Lo: Decliners led 1.81 to 1
Previous Session: Decliners led 2.52 to 1
New Highs: 45 (-29)
New Lows: 152 (+48)
S&P
Stats: -19.30 points (-0.67%) to close at 2840.23
NYSE Volume: 754.908M (-10.70%)
Up Volume: 277.153M (+68.466M)
Down Volume: 455.618M (-173.187M)
A/D and Hi/Lo: Decliners led 1.97 to 1
Previous Session: Decliners led 2.88 to 1
New Highs: 72 (-40)
New Lows: 116 (+36)
SENTIMENT
VIX: 16.31; +0.35
VXN: 21.64; +2.25
VXO: 17.70; +0.67
Put/Call Ratio (CBOE): 0.85; -0.24. Even with the selling, put activity fell below 1.0 after 8 of 9 sessions over 1.0. After so many fear days this may show the downside is exhausted near term, meaning a rebound/relief bounce.
Bulls and Bears:
No surprise the bulls faded after trading over the 55 level. Bears faded, however, as the two sides continue to move opposite one another. Bears are falling again and that is not a good indication for the upside.
At this juncture there are still no extremes. Bulls are close to 60, but not there. Bears have overall been more complacent of late.
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: Shading to yellow for this week even as bulls backed off. Not in the 60's, but not much fear from the selling.
Bulls: 51.4 versus 55.5
Bears: 17.5 versus 17.8
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.
OTHER MARKETS
INTEREST RATES
Threat level: Back to yellow. 5 year, and 2 year are below the 3 month treasury. Getting over the second 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.
The 3 month yield versus the 10 year: Spread rises 2BP to 3BP.
The 2 year versus the 10 year: Spread falls 1BP to 19BP
10 year: 2.416% versus 2.393
3 month: 2.382% versus 2.393%
2 year: 2.221 versus 2.198%
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.
The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.
EUR/USD: 1.1170 versus 1.11573. Euro actually bounced after a bit higher low in the trend lower below the 50 day MA.
Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.
USD/JPY: 110.085 versus 110.068. Bounced to the 20 day EMA, showing a doji.
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: 63.21, +0.29. Held last week's break higher off the 200 day SMA test. Doji test, likely a continuation doji, meaning after this pause oil continues to rise. That, however, belies how horrible things are supposed to get due to the weak world economies.
Gold: 1277.30, +1.60. Two hard sessions lower and a doji at some support. Trying to base out after that February high.
TUESDAY
Another tech beating to the downside, but afterhours there is an upside bias in the futures with tech names trying to recoup lost ground. GOOG, CSCO, AMZN. Could just be a cruel hoax even if it holds to morning: a gap higher that is then sold, driving the indices to fully test that next support.
On the other hand, as noted earlier, they gapped to doji and may already be in position to try another rebound. Doubt it will last bigger picture, but for the near term many of the stocks that led the selling are way oversold or getting there, namely chips: XLNX, INTC, SMTC, MU are just a few.
Stepping into the upside after such selling takes resolve - and lowered expectations for how far the move will go. Stocks such as HUBS, TWLO, MTCH on these short pullbacks testing good moves are very alluring. No one is selling them, and thus they tend to bounce when the overall market selling pressure subsides. DRI looks super as it breaks higher, IR is one of the more staid stocks in great shape, MCK as well. There are bounce opportunities. But, the market has undergone distribution, has sold hard, and has not shown it can make and sustain a new move. Thus, any upside is just a bounce play. That can work.
Have a great evening!
End part 1
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5/20/2019 Investment House Daily
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MARKET ALERTS:
Targets hit: AVGO
Entry alerts: None issued
Trailing stops: None issued
Stop alerts: AMAT
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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
- Growth hit as tech companies have to cut off Huawei
- All indices gap lower, SOX gaps to the next level as NASDAQ approaches next potential support.
- Fed again thinking it is smarter than the markets.
- Fighting a trade war is the result of failed central bank policies, the same failed policies it used to cause other catastrophes.
- Chips are so ugly they may be ready to bounce already.
- With the distribution, any bounce is just a bounce. Still.
The Wednesday and Thursday bounce that stalled Friday turned back into selling Monday, the same as the prior week. I suppose you could say the market is showing a series of 'gray Mondays.' In any event gaps lower across the board for the stock indices, but growth clearly got the worst of it.
SP500 -19.30, -0.67%
NASDAQ -113.90, -1.46%
DJ30 -84.10, -0.33%
SP400 -0.73%
RUTX -0.70%
SOX -4.02%
NASDAQ 100 -1.69%
VOLUME: NYSE -11%, NASDAQ -2%. NYSE trade fell well below average, further indication the selling was not that heavy or aggressive on SP500 and DJ30. NASDAQ trade remained above average, still showing overall aggressive selling.
ADVANCE/DECLINE: NYSE -2:1, NASDAQ -1.8:1. Large cap tech selling for the most part.
Tech was the focus once again as trade issues remain front burner. As a result of the black listing of Huawei, several US companies cut ties. GOOG cut licenses to Android while INTC pulled its products as well. NKE and other shoe makers are complaining they cannot move fast enough, that shoes are different from 'apparel,' and that the year for them was not enough to relocate production.
China hinted at retaliation with rare earths, something that could bite. We all knew China was buying up and locking down all the rare earths it could over the past 15 years. Saving for a rainy day I supposed. Thus, China said it was in 'no rush' to resume the trade talks. What did the US do in that 15 years? Not much. Printed several trillion dollars at the Fed.
Speaking of the Fed, the Atlanta Fed governor said he wasn't sure what the market was looking at because he certainly did not see a rate cut in 2019. Ah, a member of the Fed who knows more than the markets. Danger, danger, danger. But then again, that is why the Fed is ALWAYS wrong: it is a small group of people who think they know more than markets. Or not. They likely just are there to keep the status quo, i.e. the super rich super rich.
GS said a tariff on all Chinese goods would lop off 6% from corporate profits. I am assuming that was US corporate profits and GS was not worrying over Chinese profits.
You know, all this started in 2000. We are now paying the price for Greenspan's actions in starting the massive Fed put. Without going into too much detail yet again, Greenspan was convinced the 'runaway consumer' and high wages would trigger inflation in our strong economy that was still riding the 20 year boom. Well, he ended up draining all liquidity from the economy after flooding it with liquidity ahead of the Y2K non-event. On top of that he aggressively hiked rates. Indeed, after NASDAQ had rolled over violently he added another 50BP rate hike.
Wow, talk about history repeating. The 1929 central bank was on the same inflation snipe hunt, convinced that the roaring twenties brought about by new tech (radio) would cause huge inflation spikes. It hiked and hiked and finally hiked a full 100BP. The market collapsed, the US and world economies followed. Hmm. I guess it beat inflation because it never showed up; just a Great Depression.
The tragedy we are paying for now is the loss of millions of tech jobs the 3 years after Greenspan blew up the tech boom. No investment was made in the US - trillions were lost in the collapse, millions thrown out of work, no investment in tech was believed safe. Instead it all moved overseas. Those jobs were lost and are never coming back. We gave away our tech advantage because people who thought they were smarter than markets blew up those markets over worries of inflation that was not present.
Now we are fighting a trade war to win back our technological advantage and not have it stolen from us again. It is not fun, it is not easy, but if the US is to maintain economic power and the dollar as the reserve currency, it must be done. Decades of weak Presidents and head in the sand congresses have put us here. I have said it often: digging out of a hole is a lot harder than staying out of it in the first place.
CHARTS
Everything gapped lower, SP500 and DJ30 just a bit (relatively), while NASDAQ, SOX and company gapped down to next potential support. Potential because in selling events all support levels are potential until proven. At least NASDAQ and SOX are again at a potential support point.
SOX was hammered again, gapping through the support where it closed Friday and now near the 200 day SMA. On the weekly chart it is not a total disaster as it is holding over the 200 day and is in the upper reaches of the prior range, but it is making things more difficult. That said, what doesn't kill you . . . Okay, reload and reset as SOX has yet another support range to try and hold.
NASDAQ was hit with a strong gap lower as well, closing near 7700 with a doji and just over last week's lows. 7650 represents, more or less, the neckline of a potential head and shoulders pattern from early March.
SP400 gapped to last week's low - Monday - showing a doji and also just over the potential neckline to a head and shoulders pattern.
RUTX shows the same action, gapping to last week's low, holding there on the close.
SP500 gapped to a doji as well, but it was nowhere near last week's low. That doesn't get it off the hook for the downside, it just was not lit up as were the tech stocks.
DJ30 sold but quite modestly, holding over the 200 day SMA and the potential neckline in its own 3 month potential head and shoulders.
LEADERSHIP
Tech was the clear loser - again - while more staid and stoic areas such as aerospace/defense, food, restaurants, some retail, personal products either gained or held their own.
Software struggled again, chips were slammed. The silver lining? Perhaps they are so beaten down they are ready to bounce. Yes, it is pretty soon, but after another blowdown through near support enough sellers could be flushed out.
Software: NOW gapped to the 20 day EMA, WDAY fell to near the 20 day EMA, ADBE gapped to near the 50 day MA. VMW cracked the 20 day EMA. COUP, WDAY, TWLO holding nicely at the 10 day EMA. MSFT not bad with a doji test of the 20 day MA. Feeling some pressure for sure, but most still holding up.
FAANG: FB gapped lower, holding over the 50 day MA where it tested last week and bounced. Okay, double bottom perhaps? Or is that just hope? AAPL gapped to a lower selloff low; did manage to come back from near 180 on the low. AMZN gapped and doji-tapped the 50 day MA on the low before rebounding decently. NFLX gapped down from the 50 day MA test, still just over the bottom of its range. GOOG gapped and sat on the 200 day SMA with a 2% loss.
Aerospace: LMT solid, LLL holding the move higher.
Food: PEP in a modest test. KO in a decent 10 day EMA test. DRI broke higher from a 7 week base with some strong volume. WING was dubbed overbought by one of the afterhours 'gurus.'
Personal products: Some pausing from PG, CL.
Retail: ULTA is trying to bounce from the 50 day MA, showing good volume. COST still solid, adding more upside. BBY hanging on at the 200 day - for now. ROST not bad. TSCO in in a really nice flag test of the 50 day MA. Some retail is working well.
Big tech: CSCO still holding up well, but ORCL is trying to break support while HPE looks ready to roll over in a bear flag.
Financials: V and MA still look great. Banks still look problematic at best, e.g. C, BAC.
Social: MTCH doji testing over the 10 day EMA. TWTR showing a doji at the upper gap point. SNAP holding the 50 day MA after a nice rebound last week. FB gapped to a doji over the 50 day MA - may be getting ready.
Semiconductors: LRCX gapped through the 50 day and sold hard. XLNX gapped lower, tapped the 200 day SMA on the low, showing a doji - perhaps ready to bounce. MU gapped down 4% to a doji. AMAT gapped lower and sold hard; earnings were good last week but could not hold it up. CY gapped and sold to near the 200 day SMA. QRVO, SWKS, AVGO all gapped lower. A circus of ugly that may be so ugly it yields a bounce.
MARKET STATS
DJ30
Stats: -84.10 points (-0.33%) to close at 25679.90
Nasdaq
Stats: -113.90 points (-1.46%) to close at 7702.38
Volume: 2.21B (-1.78%)
Up Volume: 609.93M (-124.08M)
Down Volume: 1.56B (+60M)
A/D and Hi/Lo: Decliners led 1.81 to 1
Previous Session: Decliners led 2.52 to 1
New Highs: 45 (-29)
New Lows: 152 (+48)
S&P
Stats: -19.30 points (-0.67%) to close at 2840.23
NYSE Volume: 754.908M (-10.70%)
Up Volume: 277.153M (+68.466M)
Down Volume: 455.618M (-173.187M)
A/D and Hi/Lo: Decliners led 1.97 to 1
Previous Session: Decliners led 2.88 to 1
New Highs: 72 (-40)
New Lows: 116 (+36)
SENTIMENT
VIX: 16.31; +0.35
VXN: 21.64; +2.25
VXO: 17.70; +0.67
Put/Call Ratio (CBOE): 0.85; -0.24. Even with the selling, put activity fell below 1.0 after 8 of 9 sessions over 1.0. After so many fear days this may show the downside is exhausted near term, meaning a rebound/relief bounce.
Bulls and Bears:
No surprise the bulls faded after trading over the 55 level. Bears faded, however, as the two sides continue to move opposite one another. Bears are falling again and that is not a good indication for the upside.
At this juncture there are still no extremes. Bulls are close to 60, but not there. Bears have overall been more complacent of late.
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: Shading to yellow for this week even as bulls backed off. Not in the 60's, but not much fear from the selling.
Bulls: 51.4 versus 55.5
Bears: 17.5 versus 17.8
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.
OTHER MARKETS
INTEREST RATES
Threat level: Back to yellow. 5 year, and 2 year are below the 3 month treasury. Getting over the second 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.
The 3 month yield versus the 10 year: Spread rises 2BP to 3BP.
The 2 year versus the 10 year: Spread falls 1BP to 19BP
10 year: 2.416% versus 2.393
3 month: 2.382% versus 2.393%
2 year: 2.221 versus 2.198%
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.
The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.
EUR/USD: 1.1170 versus 1.11573. Euro actually bounced after a bit higher low in the trend lower below the 50 day MA.
Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.
USD/JPY: 110.085 versus 110.068. Bounced to the 20 day EMA, showing a doji.
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: 63.21, +0.29. Held last week's break higher off the 200 day SMA test. Doji test, likely a continuation doji, meaning after this pause oil continues to rise. That, however, belies how horrible things are supposed to get due to the weak world economies.
Gold: 1277.30, +1.60. Two hard sessions lower and a doji at some support. Trying to base out after that February high.
TUESDAY
Another tech beating to the downside, but afterhours there is an upside bias in the futures with tech names trying to recoup lost ground. GOOG, CSCO, AMZN. Could just be a cruel hoax even if it holds to morning: a gap higher that is then sold, driving the indices to fully test that next support.
On the other hand, as noted earlier, they gapped to doji and may already be in position to try another rebound. Doubt it will last bigger picture, but for the near term many of the stocks that led the selling are way oversold or getting there, namely chips: XLNX, INTC, SMTC, MU are just a few.
Stepping into the upside after such selling takes resolve - and lowered expectations for how far the move will go. Stocks such as HUBS, TWLO, MTCH on these short pullbacks testing good moves are very alluring. No one is selling them, and thus they tend to bounce when the overall market selling pressure subsides. DRI looks super as it breaks higher, IR is one of the more staid stocks in great shape, MCK as well. There are bounce opportunities. But, the market has undergone distribution, has sold hard, and has not shown it can make and sustain a new move. Thus, any upside is just a bounce play. That can work.
Have a great evening!
End part 1
_______________________________________________________
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Market Alert - To the Close
Well, DJ30 has recovered much of the losses, but the growth areas and even SP500 are still struggling with those gaps lower. The dilemma facing us is the gap lower is holding for areas such as chips, but they gapped significantly, making them not great entries.
Another issue is SOX gapped lower but is just over the 200 day MA. Thus, stocks such as LRCX are down hard, but these stocks may be close to finding some bounce support. GOOG is another example: gapped to the 200 day MA, undercut it briefly, rebounded to show a doji at that support. Not the best entry points from a probabilities standpoint.
That said, some of the stronger areas of late are struggling, and that would be software as it is tech/growth. NOW is struggling, WDAY is down harder. COUP is fine and MSFT not bad, but the point is the group is showing some strain.
Even NASDAQ gapped to a doji over last week's low. The oversold areas may be looking at making a stand. We will see on Tuesday, and with the size of the gaps lower, we are not too wild about trying to pull off a long shot.
Given the sharp moves to support that do not provide great entries, it could be there is at least an early move upside Tuesday. If nothing else we can use that as a better entry for downside positions as it takes back some of the gap losses today.
SP500 -18.69, -0.63%
NASDAQ -107.80, -1.38%
DJ30 -74.79, -0.29%
SP400 -0.69%
RUTX -0.66%
SOX -3.91%
______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
Alert Key
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Another issue is SOX gapped lower but is just over the 200 day MA. Thus, stocks such as LRCX are down hard, but these stocks may be close to finding some bounce support. GOOG is another example: gapped to the 200 day MA, undercut it briefly, rebounded to show a doji at that support. Not the best entry points from a probabilities standpoint.
That said, some of the stronger areas of late are struggling, and that would be software as it is tech/growth. NOW is struggling, WDAY is down harder. COUP is fine and MSFT not bad, but the point is the group is showing some strain.
Even NASDAQ gapped to a doji over last week's low. The oversold areas may be looking at making a stand. We will see on Tuesday, and with the size of the gaps lower, we are not too wild about trying to pull off a long shot.
Given the sharp moves to support that do not provide great entries, it could be there is at least an early move upside Tuesday. If nothing else we can use that as a better entry for downside positions as it takes back some of the gap losses today.
SP500 -18.69, -0.63%
NASDAQ -107.80, -1.38%
DJ30 -74.79, -0.29%
SP400 -0.69%
RUTX -0.66%
SOX -3.91%
______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
Alert Key
http://www.investmenthouse.com/alertkey.htm
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Market Alert - PreMarket
Futures vs FV: SP -22.60; DJ -161.00; NASD -123.93
Futures started slightly lower but that has tailed off significantly as the premarket session unfolded.
Trade: After the Administration blacklisted Huawei and related companies, GOOG pulled Huawei's android license. INTC cut ties as well. I would expect some kind of retaliation against AAPL.
GS says tariffs on all Chinese goods would cut corporate profits 6%.
China says it is in 'no rush' to restart trade talks with US.
M&A: S/TMOS merger set to receive approval.
Fed: Atlanta Fed governor says he is not anticipating a rate cut in 2019 despite what the market says.
Upgrades: TGT; UAL; GD; ZOOM;
Downgrades: DB (sell); AAL; TSLA; AAPL (price target lowered)
Jobs: F cutting 7,000 positions (10%), mostly in Europe
OTHER MARKETS
Bonds: 2.389% VS 2.394%
EUR/USD: 1.1164, +0.0007
USD/JPY: 109.87, -0.20
Oil: 62.69, -0.07
Gold: 1275.90, +0.20
Futures trying to stabilize the past half hour, working laterally, starting to rise some off the lows. Still a weak open.
Many focusing on the semiconductors -- understandably as they led the market higher, are a key component, and closed last week at the top of the prior range, giving up the breakout to a new high. This is a key level to make a stand. Not holding my breath on that one just yet.
Gap lower makes it harder to enter downside, but if there is a bit of a bounce, that could open some opportunities.
______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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Futures started slightly lower but that has tailed off significantly as the premarket session unfolded.
Trade: After the Administration blacklisted Huawei and related companies, GOOG pulled Huawei's android license. INTC cut ties as well. I would expect some kind of retaliation against AAPL.
GS says tariffs on all Chinese goods would cut corporate profits 6%.
China says it is in 'no rush' to restart trade talks with US.
M&A: S/TMOS merger set to receive approval.
Fed: Atlanta Fed governor says he is not anticipating a rate cut in 2019 despite what the market says.
Upgrades: TGT; UAL; GD; ZOOM;
Downgrades: DB (sell); AAL; TSLA; AAPL (price target lowered)
Jobs: F cutting 7,000 positions (10%), mostly in Europe
OTHER MARKETS
Bonds: 2.389% VS 2.394%
EUR/USD: 1.1164, +0.0007
USD/JPY: 109.87, -0.20
Oil: 62.69, -0.07
Gold: 1275.90, +0.20
Futures trying to stabilize the past half hour, working laterally, starting to rise some off the lows. Still a weak open.
Many focusing on the semiconductors -- understandably as they led the market higher, are a key component, and closed last week at the top of the prior range, giving up the breakout to a new high. This is a key level to make a stand. Not holding my breath on that one just yet.
Gap lower makes it harder to enter downside, but if there is a bit of a bounce, that could open some opportunities.
______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
Alert Key
http://www.investmenthouse.com/alertkey.htm
PLEASE DO NOT REPLY TO THIS EMAIL. USE THE CONTACT US PAGE ON OUR WEBSITE.
Customer Support: http://investmenthouse.com/contact_us.php
Sunday, May 19, 2019
Get Comfortable With the Downside (Weekend Newsletter)
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| Market Summary (continued) Friday the stock indices tried to make it four straight sessions upside, starting weaker but then powering higher into midmorning. This action occurred more than once on the week, and low to high action is typically good action. Of course, it IS necessary to hold the moves. Thursday the indices rallied nicely, but they also gave up a good amount of the gains into the closing bell. Friday they took it a step - or two or three - farther. Decent enough low to high gains as the Administration postponed auto tariffs for six months, but they could not hold up in the withering fire of late session when trade news hit again, this time not so friendly. Reports from CNBC and others indicated that no talks were ongoing between the US and China, at least regarding trade. Not all that surprising given China's 'outrage' at the US blacklisting Huawei and several related entities as security risks. There are so many episodes of companies finding security backdoors in products sold by Huawei that it is no secret. China just doesn't like the fact that a major China company was caught stealing. It is very hard to do business with that mindset. It might be hard on China as well. Looking at the Shanghai chart pattern and there is a very definite head and shoulders that Friday looked as if it was rolling over from the right shoulder. Better get the PBOC and everyone else working on more stimulus right now. That said, the US stock indices were not exactly looking rosy Friday. Of course, the US stock indices are trading just off all-time highs versus almost 50% off the 2018 highs. Nonetheless, there are some serious pattern issues for US stocks after the indices stalled at the prior highs three weeks ago. Read "The Daily" Entire Weekend Summary Watch Market Overview Video Watch Technical Summary Video Watch Next Session Video
It was an up week with downside bookends Monday and Friday. That led to some upside gains and some downside gains, and it looks as if there will be more downside gains ahead. ZS (Zscaler, Inc.) Company Profile Entered ZS on 4/25 as it moved up from a 50 day EMA test. Picked up the stock for $67.24 and some July $65.00 strike call options for $6.40. It was somewhat bumpy, but ZS managed to trend higher and thus we were able to let it work without too much anxiety in a market already filled with anxiety. It did make an intraday test of the 50 day EMA in early May, but that same day it reversed upside so letting a good play have a bit of leeway worked out. It really took off this past week, hitting the target on Thursday. We banked half the stock for $78.65, gaining almost 17%. We banked half the options for $16.50, a 155+% gain. TGT (Target Corporation) Company Profile Moved in on the downside 5/1 as TGT made a big break lower from the 200 day MA. It gapped below it three sessions earlier, and we were ready when it turned down again, continuing the gap through support. We picked up some June $77.50 strike put options for $4.25. TGT then proceeded to work lower below the 10 day EMA for 8 sessions. Monday TGT gapped lower and sold hard. Tuesday it gapped again, sold, but started to hold at some support. That was our cue to take the gain. We sold the options for $7.60, banking over 75%. Receive a 2 week trial and if you stay on receive a $30 per month discount! | ||
| 2) STOCK SPLIT REPORT Here's a leader play and our current analysis.
Company Profile EARNINGS: 08/01/2019 STATUS: Cup w/handle. PTCT continues working on its pattern, breaking higher then testing last week. Same cup with handle from September 2018 we discussed before when we were looking to play PTCT, but now it is trading post-earnings. Earnings saw it gap and drop, but then immediately rebounded to just over the top of the handle. Faded to test in last week's weakness, holding over the 20 day EMA, testing on lighter volume. We want to play a new break higher for a run at the September highs. That move gains 17% on the stock, 85% on the options. CHART VIDEO Volume: 670.877K Avg Volume: 784.565K BUY POINT: $40.88 Volume=775K Target=$47.94 Stop=$38.55 POSITION: PTCT SEP 20 2019 40.00C - (50 delta) &/or Stock Learn more about our Stock Split Report and how we have made gains of 321% with our powerful stock split plays! Save $360 per year on the Stock Split Report! Plus 2 week trial! | ||
BBY (Best Buy--$68.93; +0.19; optionable) Company Profile EARNINGS: 05/23/2019 STATUS: A short double top in April and early May, then a precipitous drop through Monday of last week. On that Monday drop BBY fell through the 200 day SMA and matched the early March low hit as BBY tested the upside earnings gap. Bounced up off that test through Friday, but looks to be stalling at the 200 day SMA. Earnings are Thursday before the open, and while BBY could break upside again on its results, it is a prime setup to gap back down from here. We like it enough to make that play and are looking to enter as BBY breaks lower off this bear flag. A move to the target gains 55%ish on the put options. CHART VIDEO Volume: 2.439M Avg Volume: 2.602M BUY POINT: $67.92 Volume=3M Target=$61.42 Stop=$70.03 POSITION: BBY JUL 19 2019 67.50P - (-40 delta) Save $600 per year and enjoy a 2 week trial of our IH Alerts Service! | ||
|
--by the MarketFN STG Team PEP (PepsiCo, Inc.) Company Profile Our Success Trading Group opened a position in PepsiCo, Inc. (Ticker: PEP) on Wednesday. We will be watching closely for an exit on PEP and for new entry points on some of our favorite stocks. Our Success Trading Group closed 7 years with 0 losses on our Main Trade Table. In fact, we closed 100% winning trades for the calendar years 2016, 2015, 2013, 2012, 2011, 2010 and 2009. All of these trades are posted on our Main Trade Table for your review during your free membership trial period. Get Our Next Trade Free - Save $50 per month! Details Here. | ||
|
AMAT - Applied Materials Inc. is currently trading at $42.70. The July $42.00 Calls (AMAT20190720C00042000) are trading at $2.60. That provides a return of about 5% if AMAT is above $42.00 on expiration Friday in July. Company Profile Learn more about our Covered Call Tables | ||
Stock Split Report: Forbes.com Best of the Web Covered Calls: Allowed in your IRA - Energize your portfolio! The Daily: "The Daily" is a must read for all investors! Success Trading Group: 7 years without a trading loss! | ||
| The foregoing is commentary for informational purposes only. All statements and expressions are the opinions of Online Investment Services, LP., or Split Ventures, Ltd. This information is not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on the related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolios of writers for this issue may, in some instances, include securities mentioned herein and on the related web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors. No one associated herewith receives compensation in any manner from any of the companies that are discussed in this newsletter or on the related websites. This email was sent to tweet@investbilling.com. | ||
|
The Daily, Part 1 of 3, 5-18-19
* * * *
5/18/2019 Investment House Daily
* * * *
Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit: None issued
Entry alerts: AAPL; CMI
Trailing stops: AAPL; LRCX
Stop alerts: MCHP; NTES; TSLA
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
https://www.investmenthouse.com/alertdaily.html
********************************************************************
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.
TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
https://investmenthouse1.com/ihmedia/f/mo/mo.mp4
TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
https://investmenthouse1.com/ihmedia/f/ts/ts.mp4
TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
https://investmenthouse1.com/ihmedia/f/nxt/nxt.mp4
********************************************************************
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
- Indices try a fourth session upside, get there, but cannot hold it.
- Overall index patterns just do not look upside positive.
- Leadership remains but it is narrower and of course the chips are down.
- SOX is at the top of its pre-breakout gains where it has to make a stand.
- If need be, get comfortable with the downside.
Friday the stock indices tried to make it four straight sessions upside, starting weaker but then powering higher into midmorning. This action occurred more than once on the week, and low to high action is typically good action.
Of course, it IS necessary to hold the moves. Thursday the indices rallied nicely, but they also gave up a good amount of the gains into the closing bell. Friday they took it a step - or two or three - farther. Decent enough low to high gains as the Administration postponed auto tariffs for six months, but they could not hold up in the withering fire of late session when trade news hit again, this time not so friendly. Reports from CNBC and others indicated that no talks were ongoing between the US and China, at least regarding trade. Not all that surprising given China's 'outrage' at the US blacklisting Huawei and several related entities as security risks. There are so many episodes of companies finding security backdoors in products sold by Huawei that it is no secret. China just doesn't like the fact that a major China company was caught stealing. It is very hard to do business with that mindset.
It might be hard on China as well. Looking at the Shanghai chart pattern and there is a very definite head and shoulders that Friday looked as if it was rolling over from the right shoulder. Better get the PBOC and everyone else working on more stimulus right now.
That said, the US stock indices were not exactly looking rosy Friday. Of course, the US stock indices are trading just off all-time highs versus almost 50% off the 2018 highs. Nonetheless, there are some serious pattern issues for US stocks after the indices stalled at the prior highs three weeks ago.
SP500 -16.79, -0.58%
NASDAQ -81.77, -1.04%
DJ30 -98.68, -0.38%
SP400 -1.15%
RUTX -1.38%
SOX -1.96%
NASDAQ 100 -1.01%
VOLUME: NYSE +14%, NASDAQ +4%. NYSE volume moved up to average as NYSE stocks rallied off lower opens but then rolled back down. Similar action for NASDAQ. That is more distribution action, i.e. higher volume dumping of stocks - clearing out on the rebound.
ADVANCE/DECLINE: NYSE -2.9:1, NASDAQ -2.5:1. Once again the downside breadth is mostly stronger than the upside.
CHARTS
Looking at the charts, there are some very clear, quite ominous double tops on SP500, NASDAQ, NASDAQ 100 when you look at a weekly chart. DJ30 showing a triple top.
SOX is a bit different: its weekly chart shows it sitting on top of the range from late 2017 to early 2019 before the run to a new high. At least it has a breakout and a test it can rally off.
On the daily charts there is that same head and shoulders look from the past three months for pretty much all the indices: SP500, NASDAQ, NASDAQ 100, DJ30, SP400.
The upshot of this is that the patterns don't look all that great. After the 2018 range/topping event, the breaks to new highs or near new highs failed. Most of the indices are now at the point of having to shake off a near term bearish pattern to have the opportunity to try and break up the bigger bearish pattern.
The market's eyes have to be on the semiconductors. A new high failed and the chips are now testing the tops of the 2018 to early 2019 range. The near term pattern here is a head and shoulders as well. If SOX can shake this off, then the rest of the market has a shot at following - for the past few years, as the chips go, so the market goes.
LEADERSHIP
Even some of the stronger sectors, e.g. software, struggled Friday. They did not roll over, but they sold back some after a series of good moves on the week. Other areas that rebounded faded some as well. Some chips are in full frontal dives while some names are hanging on - but it could be there are too few hanging on to offset those dropping.
FAANG: AMZN and GOOG were solid performers starting midweek, and Friday both faded, reversing early upside. Very good moves in recovery, but the overall patterns are not great for the upside. AAPL tapped the 200 day on the week then gapped lower, failing a rebound attempt. FB failed to hold a move over the 10 da for the third session. NFLX looks as if it is failing at the 50 day MA.
Food: Not bad still. PEP a modest Friday gain on top of good moves. KO off some. WING still looking solid.
Personal products: Strong moves through Thursday, backed off some Friday but still solid.
Software: Strong moves on the week, tested on Friday, however. NOW, COUP, HUBS, WDAY - great movers and leaders - all gave back some Friday, but darn little. TEAM exploded higher the past two weeks and it held up very well Friday as well. MSFT was a bit weak Friday after a good Wednesday/Thursday move. Still a solid group.
Big tech: Stocks such as CSCO continued to perform - CSCO's earnings reversed a four week slide off its very solid December to early April rally.
Retail: Some are still solid, e.g. COST, ROST. BBY looks rather weak and ready to fill a gap and even AMZN's overall pattern is not confidence building.
Financials: V posted a strong week, off just a bit Friday. MA showed similar action. Banks such as C, BAC do not look good. MS and GS are struggling as well.
Social: TWTR, SNAP still not bad. FB is not bad either after that big break higher Wednesday. MTCH took a day off after a big week upside.
Transports: While DJ20 shows a bear flag in a head and shoulders, rails are not bad, e.g. CSX, KSU, NSC. Truckers are okay though UPS and FDX are selling off.
Oil: Weak as large and small struggle. XOM, SWN.
MARKET STATS
DJ30
Stats: -98.68 points (-0.38%) to close at 25764.00
Nasdaq
Stats: -81.77 points (-1.04%) to close at 7816.28
Volume: 2.25B (+4.17%)
Up Volume: 734.01M (-585.99M)
Down Volume: 1.5B (+696.28M)
A/D and Hi/Lo: Decliners led 2.52 to 1
Previous Session: Advancers led 1.44 to 1
New Highs: 74 (-43)
New Lows: 104 (+30)
S&P
Stats: -16.79 points (-0.58%) to close at 2859.53
NYSE Volume: 845.375M (+13.73%)
Up Volume: 208.687M (-283.671M)
Down Volume: 628.806M (+394.428M)
A/D and Hi/Lo: Decliners led 2.88 to 1
Previous Session: Advancers led 2.25 to 1
New Highs: 112 (-64)
New Lows: 80 (+37)
SENTIMENT
VIX: 15.96; +0.67
VXN: 19.39; +0.99
VXO: 17.03; +0.84
Put/Call Ratio (CBOE): 1.09; +0.07. Eight of nine sessions over 1.0. Lots of negativity by this measure, but the other indicators are not there yet.
Bulls and Bears:
No surprise the bulls faded after trading over the 55 level. Bears faded, however, as the two sides continue to move opposite one another. Bears are falling again and that is not a good indication for the upside.
At this juncture there are still no extremes. Bulls are close to 60, but not there. Bears have overall been more complacent of late.
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: Shading to yellow for this week even as bulls backed off. Not in the 60's, but not much fear from the selling.
Bulls: 51.4 versus 55.5
Bears: 17.5 versus 17.8
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.
OTHER MARKETS
INTEREST RATES
Threat level: RED. 10 year, 5 year, and 2 year are below the 3 month treasury. This is the second 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.
The 3 month yield versus the 10 year: Spread is flat from 1BP.
The 2 year versus the 10 year: Spread holds at 20BP
10 year: 2.393 versus 2.394%
3 month: 2.393% versus 2.401
2 year: 2.198% versus 2.194%
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.
The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.
EUR/USD: 1.11573 versus 1.1174. After moving up to the 50 day MA, the euro has slid back down near the April low.
Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.
USD/JPY: 110.068 versus 109.879. Dollar catching a bid Thursday and Friday after three weeks of decline from the 200 day MA.
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: 62.92, +0.05. After a 2.5 week test at the 200 day SMA, bounced late week, but still off the recent highs just over 66.
Gold: 1275.70, -10.50. Diving lower Thursday and Friday, the same action as in late March and early April: as soon as gold rallies some, it gets sold hard.
MONDAY
While some solid upside leaders remain in solid shape, e.g. software, food, some retail, personal products, not all of them are bull market type stocks and there are just not a lot of them as well. With semiconductors in a serious fight and the indices patterns in serious longer term topping patterns, there may not be enough leadership to move the market higher once again.
We are still playing some upside that looks quality, watching carefully for cracks in the solid patterns. There are still upside possibilities such as VZ and software to name just a couple, and we will look at them in the event they win out. At the same time, however, there are definite downside setups that correspond to the issues the indices are showing. We have more than a few of those working and will look to add more if the downside setups make the downside break.
I know some people do not like the downside, but those who embrace it when it is here find that the gains come rapidly - they also can disappear rapidly as what falls hard tends to bounce hard in relief moves before rolling over once more. If you give it a shot, you will find that gains can come as easily and even more so than in a strong move higher.
Have a great weekend!
End part 1
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5/18/2019 Investment House Daily
* * * *
Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit: None issued
Entry alerts: AAPL; CMI
Trailing stops: AAPL; LRCX
Stop alerts: MCHP; NTES; TSLA
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
https://www.investmenthouse.com/alertdaily.html
********************************************************************
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.
TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
https://investmenthouse1.com/ihmedia/f/mo/mo.mp4
TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
https://investmenthouse1.com/ihmedia/f/ts/ts.mp4
TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
https://investmenthouse1.com/ihmedia/f/nxt/nxt.mp4
********************************************************************
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
- Indices try a fourth session upside, get there, but cannot hold it.
- Overall index patterns just do not look upside positive.
- Leadership remains but it is narrower and of course the chips are down.
- SOX is at the top of its pre-breakout gains where it has to make a stand.
- If need be, get comfortable with the downside.
Friday the stock indices tried to make it four straight sessions upside, starting weaker but then powering higher into midmorning. This action occurred more than once on the week, and low to high action is typically good action.
Of course, it IS necessary to hold the moves. Thursday the indices rallied nicely, but they also gave up a good amount of the gains into the closing bell. Friday they took it a step - or two or three - farther. Decent enough low to high gains as the Administration postponed auto tariffs for six months, but they could not hold up in the withering fire of late session when trade news hit again, this time not so friendly. Reports from CNBC and others indicated that no talks were ongoing between the US and China, at least regarding trade. Not all that surprising given China's 'outrage' at the US blacklisting Huawei and several related entities as security risks. There are so many episodes of companies finding security backdoors in products sold by Huawei that it is no secret. China just doesn't like the fact that a major China company was caught stealing. It is very hard to do business with that mindset.
It might be hard on China as well. Looking at the Shanghai chart pattern and there is a very definite head and shoulders that Friday looked as if it was rolling over from the right shoulder. Better get the PBOC and everyone else working on more stimulus right now.
That said, the US stock indices were not exactly looking rosy Friday. Of course, the US stock indices are trading just off all-time highs versus almost 50% off the 2018 highs. Nonetheless, there are some serious pattern issues for US stocks after the indices stalled at the prior highs three weeks ago.
SP500 -16.79, -0.58%
NASDAQ -81.77, -1.04%
DJ30 -98.68, -0.38%
SP400 -1.15%
RUTX -1.38%
SOX -1.96%
NASDAQ 100 -1.01%
VOLUME: NYSE +14%, NASDAQ +4%. NYSE volume moved up to average as NYSE stocks rallied off lower opens but then rolled back down. Similar action for NASDAQ. That is more distribution action, i.e. higher volume dumping of stocks - clearing out on the rebound.
ADVANCE/DECLINE: NYSE -2.9:1, NASDAQ -2.5:1. Once again the downside breadth is mostly stronger than the upside.
CHARTS
Looking at the charts, there are some very clear, quite ominous double tops on SP500, NASDAQ, NASDAQ 100 when you look at a weekly chart. DJ30 showing a triple top.
SOX is a bit different: its weekly chart shows it sitting on top of the range from late 2017 to early 2019 before the run to a new high. At least it has a breakout and a test it can rally off.
On the daily charts there is that same head and shoulders look from the past three months for pretty much all the indices: SP500, NASDAQ, NASDAQ 100, DJ30, SP400.
The upshot of this is that the patterns don't look all that great. After the 2018 range/topping event, the breaks to new highs or near new highs failed. Most of the indices are now at the point of having to shake off a near term bearish pattern to have the opportunity to try and break up the bigger bearish pattern.
The market's eyes have to be on the semiconductors. A new high failed and the chips are now testing the tops of the 2018 to early 2019 range. The near term pattern here is a head and shoulders as well. If SOX can shake this off, then the rest of the market has a shot at following - for the past few years, as the chips go, so the market goes.
LEADERSHIP
Even some of the stronger sectors, e.g. software, struggled Friday. They did not roll over, but they sold back some after a series of good moves on the week. Other areas that rebounded faded some as well. Some chips are in full frontal dives while some names are hanging on - but it could be there are too few hanging on to offset those dropping.
FAANG: AMZN and GOOG were solid performers starting midweek, and Friday both faded, reversing early upside. Very good moves in recovery, but the overall patterns are not great for the upside. AAPL tapped the 200 day on the week then gapped lower, failing a rebound attempt. FB failed to hold a move over the 10 da for the third session. NFLX looks as if it is failing at the 50 day MA.
Food: Not bad still. PEP a modest Friday gain on top of good moves. KO off some. WING still looking solid.
Personal products: Strong moves through Thursday, backed off some Friday but still solid.
Software: Strong moves on the week, tested on Friday, however. NOW, COUP, HUBS, WDAY - great movers and leaders - all gave back some Friday, but darn little. TEAM exploded higher the past two weeks and it held up very well Friday as well. MSFT was a bit weak Friday after a good Wednesday/Thursday move. Still a solid group.
Big tech: Stocks such as CSCO continued to perform - CSCO's earnings reversed a four week slide off its very solid December to early April rally.
Retail: Some are still solid, e.g. COST, ROST. BBY looks rather weak and ready to fill a gap and even AMZN's overall pattern is not confidence building.
Financials: V posted a strong week, off just a bit Friday. MA showed similar action. Banks such as C, BAC do not look good. MS and GS are struggling as well.
Social: TWTR, SNAP still not bad. FB is not bad either after that big break higher Wednesday. MTCH took a day off after a big week upside.
Transports: While DJ20 shows a bear flag in a head and shoulders, rails are not bad, e.g. CSX, KSU, NSC. Truckers are okay though UPS and FDX are selling off.
Oil: Weak as large and small struggle. XOM, SWN.
MARKET STATS
DJ30
Stats: -98.68 points (-0.38%) to close at 25764.00
Nasdaq
Stats: -81.77 points (-1.04%) to close at 7816.28
Volume: 2.25B (+4.17%)
Up Volume: 734.01M (-585.99M)
Down Volume: 1.5B (+696.28M)
A/D and Hi/Lo: Decliners led 2.52 to 1
Previous Session: Advancers led 1.44 to 1
New Highs: 74 (-43)
New Lows: 104 (+30)
S&P
Stats: -16.79 points (-0.58%) to close at 2859.53
NYSE Volume: 845.375M (+13.73%)
Up Volume: 208.687M (-283.671M)
Down Volume: 628.806M (+394.428M)
A/D and Hi/Lo: Decliners led 2.88 to 1
Previous Session: Advancers led 2.25 to 1
New Highs: 112 (-64)
New Lows: 80 (+37)
SENTIMENT
VIX: 15.96; +0.67
VXN: 19.39; +0.99
VXO: 17.03; +0.84
Put/Call Ratio (CBOE): 1.09; +0.07. Eight of nine sessions over 1.0. Lots of negativity by this measure, but the other indicators are not there yet.
Bulls and Bears:
No surprise the bulls faded after trading over the 55 level. Bears faded, however, as the two sides continue to move opposite one another. Bears are falling again and that is not a good indication for the upside.
At this juncture there are still no extremes. Bulls are close to 60, but not there. Bears have overall been more complacent of late.
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: Shading to yellow for this week even as bulls backed off. Not in the 60's, but not much fear from the selling.
Bulls: 51.4 versus 55.5
Bears: 17.5 versus 17.8
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.
OTHER MARKETS
INTEREST RATES
Threat level: RED. 10 year, 5 year, and 2 year are below the 3 month treasury. This is the second 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.
The 3 month yield versus the 10 year: Spread is flat from 1BP.
The 2 year versus the 10 year: Spread holds at 20BP
10 year: 2.393 versus 2.394%
3 month: 2.393% versus 2.401
2 year: 2.198% versus 2.194%
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.
The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.
EUR/USD: 1.11573 versus 1.1174. After moving up to the 50 day MA, the euro has slid back down near the April low.
Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.
USD/JPY: 110.068 versus 109.879. Dollar catching a bid Thursday and Friday after three weeks of decline from the 200 day MA.
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: 62.92, +0.05. After a 2.5 week test at the 200 day SMA, bounced late week, but still off the recent highs just over 66.
Gold: 1275.70, -10.50. Diving lower Thursday and Friday, the same action as in late March and early April: as soon as gold rallies some, it gets sold hard.
MONDAY
While some solid upside leaders remain in solid shape, e.g. software, food, some retail, personal products, not all of them are bull market type stocks and there are just not a lot of them as well. With semiconductors in a serious fight and the indices patterns in serious longer term topping patterns, there may not be enough leadership to move the market higher once again.
We are still playing some upside that looks quality, watching carefully for cracks in the solid patterns. There are still upside possibilities such as VZ and software to name just a couple, and we will look at them in the event they win out. At the same time, however, there are definite downside setups that correspond to the issues the indices are showing. We have more than a few of those working and will look to add more if the downside setups make the downside break.
I know some people do not like the downside, but those who embrace it when it is here find that the gains come rapidly - they also can disappear rapidly as what falls hard tends to bounce hard in relief moves before rolling over once more. If you give it a shot, you will find that gains can come as easily and even more so than in a strong move higher.
Have a great weekend!
End part 1
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