Wednesday, May 15, 2019

The Daily, Part 1, 5-15-19

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5/15/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: None issued
Entry alerts: PEP; PG; V
Trailing stops: None issued
Stop alerts: None issued

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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.


- Chinese, US data push futures lower, but a delay in auto tariffs rebounds indices to positive.
- Large cap NASDAQ leads the market back upside with some impressive moves from GOOG et al.
- Key indices are back to the 50 day MA and the March highs on light volume. Not convincing upside.
- Bonds remain inverted, others finally noticing. Will the Fed?
- 2-day bounce looks very much like a relief move that could be over as fast as Thursday.

Wednesday was setting up to be a downside continuation after the Tuesday bounce on the heels of the Monday downside slaughter. Made sense: the indices broke key support levels, posted a modest, low volume relief day, then would roll over and finish the move to next support, e.g. the 200 day SMA for SP500 and NASDAQ.

Futures were down but not sharply lower. Chinese data for retail sales, industrial production and fixed asset investment all missed expectations. Apparently the tariffs in existence already are taking their toll -- but we knew that to be the case. No worries, however, for Chinese markets as they traded a bit higher on the idea that misses in economic data mean more stimulus. Giddy up as some of the afterhours trading show clowns would say. Xi even got some words in, opining it is 'foolish' for other countries to try to impose upon others how they should act, etc. Sure, do your own thing Mr. Xi, but don't expect the rest of the world to play along with you.

Futures doubled losses, however, when Retail Sales data was released, and then weakened further when the capacity and production numbers hit.

Retail Sales, April: -0.2% vs +0.2% expected vs 1.7% prior (from 1.6%).
Year/year: +3.3%

Ex-Autos: 0.1% vs 0.6% expected vs 1.3% prior (from 1.2%)
Year/year: +3.1%

Control Group: 0.0 vs 1.0 prior

Lower: autos -1.1%, internet sales -0.15%, appliances and apparel down as well.

Empire Manufacturing PMI, May: 17.1 vs 7.7 exp vs 10.1 April.
Not bad at all. Nice to see.

Industrial Production, April: -0.5% vs 0.1% exp vs 0.2 prior (from -0.1%)

Capacity Utilization: 77.9 vs 78.8 exp vs 78.5% March (from 78.8%)

Bonds: All this weaker economic data pushed bond yields lower keeping the 3 month/10 year treasuries inverted. Investor's Business Daily finally picked up on this tonight. The Fed controls the short term rates and they are higher than longer term as they are propped up by the Fed. If the real rate of money is lower, the Fed needs to take heed. The yield curve is starting to scream at the Fed. If it waits until the end of July to move that is likely too late.

Futures put in a double shuffle lower with Dow futures dropping from -70 to -145. Yes, the test of the 200 day SMA looked to be on the way. Market needs it. Get it done, get it over with.

Stocks sold at the open, bounced modestly in relief, then at 10:10ET reports the Administration would delay import tariffs on autos circulated and stocks spurted upside. That set off a rally up to the last hour. Nice gains as a result, led by tech and particularly the biggest tech. Some fading in the last hour, but the gains held.

SP500 16.55, 0.58%
NASDAQ 87.66, 1.13%
DJ30 115.97, 0.45%
SP500 0.27%
RUTX 0.34%
SOX 0.81%
NASDAQ 100 1.37%

VOLUME: NYSE -5%, NASDAQ -7%. Of course, trade declined on an upside session. Volume declines on the upside, rising on the downside is characteristic price/volume action when big investors are unloading shares.

ADVANCE/DECLINE: NYSE 2:1, NASDAQ 1.5:1. No great shakes as the large caps led the way as noted earlier. As with volume, characteristic of a relief bounce versus a new leg higher.


The price/volume action and the internals are indicative of a relief bounce. The chart patterns in the indices also suggest a relief move bounce in progress the past two sessions. Do not be surprised to see the indices flare out near the 50 day MA's where SP500, NASDAQ, NASDAQ 100, SOX closed Wednesday.


It is apparent the Tuesday modest rally was not the end of the relief move and that the indices wanted to bounce to the 50 day EMA to test that breach without testing to the 200 day MA. Perhaps, perhaps that means the 200 day will actually provide some support? We will see.

NASDAQ 100: Have to lead with this group as it led the market higher in the rebound. GOOG +3.9%, FB 3%, NFLX 2.7% -- the big names finally received new bids, aided by an upgrade in GOOG that unleashed buys from many wanting to buy but waiting to get in. NASDAQ 100 rallied to the 50 day MA, still not closing the Monday gap, but at a very important resistance level that it gapped through Monday.

NASDAQ: Same action, rallying up to the 50 day MA's, testing the break lower. Rallied back to test the break of this key level, basically at the mid-March high and thus a point where NASDAQ could stall and form the apex of a right shoulder to a head and shoulders that spans March to present.

SP500: Bounced for a second session off a lower open, moving decently but certainly not with NASDAQ's panache. Up to the 50 day MA as well along with the mid-March bounce high, that potential peak of a right shoulder to a head and shoulders top spanning March to present. A weak rebound thus far and that suggests the 50 day/gap point/March peak represents a key level: after all, it gapped below those levels on the way down, a strong move. Thus far this move back up is not as strong.

SOX: Very similar to SP500 with a pair of modest moves back up to the 50 day MA after gapping through that support Monday. Looks very much like a modest bounce higher to test the support that was broken.

DJ30: Started the session again at the 200 day SMA and moved higher from there. Unlike the other indices, DJ30 is still well below the 50 day MA's that are coincident with the late February peak. If SP500 and SOX look to be weak rebounds, this one is very weak.

SP400: Started at the same point it started the Tuesday session, managing to rally and close just over the 200 day SMA. Still below the Monday lower gap point. Not much of a move higher by the midcaps, and obviously they were a clearly lagging group Wednesday.

RUTX: Two slow days upside after the harsh Monday dive bomb. As with DJ30, not even back to the 50 day MA's yet. Bouncing but just following along, and that means it likely stalls out relatively quickly.


FAANG: From unimpressive to at least impressive in percentage moves. GOOG was up well over 4% before it slid some last hour. FB posted a nice break higher off the 50 day MA test, and the move was on decent trade. AMZN also moved up off a 50 day MA drop Monday and Tuesday. Decent trade. AAPL up on lower trade, tapping at the 200 day SMA on the high. Just not much strength for AAPL. NFLX up off support over the 200 day SMA, very solid volume. Trying to bounce from the bottom of its 4 month range.

Software: Solid again in most cases. COUP moved to a higher high on rising, average volume. NOW up again but no volume. WDAY posting a nice move on solid enough trade. HUBS started upside after gapping lower but volume was light so we held off. VMW moving well. MSFT started higher on decent volume off this test; promising. NEWR gapped below the 50 day MA.

Semiconductors: NVDA still stinks. LRCX bouncing off the 50 day MA, so-so volume, doing what it needed to do. AVGO rallied to tap the 20 day MA on very light trade; looks as if it will roll over here. XLNX upped its guidance but not many seemed to care, posting a modest bounce. SWKS up a bit, SLAB bounced but volume was light. Same for SMTC. These look as if they are bouncing to set up some downside plays. UCTT, BRKS still quite solid. AMAT jumped up to the 50 day MA on rising, above average volume. Some promising patterns and moves, many are not.

Personal products: CL modestly higher on big volume. PG posted a pretty solid move. WING holding the 20 day EMA with a doji.

Food: PEP broke to a higher high. MCD still working laterally below the recent highs. jumped, faded. WING dropped back to the 10 day EMA. KO breaking higher over the late April peak.

Financials: V posting a nice move upside on solid volume. Banks were up in some cases (JPM, C) but not much. BAC lower. TCBI, regional, showing a nice doji tap of the 50 day SMA. Overall lackluster.

Machinery: Did not move much. CMI up to the 50 day MA, lower trade. CAT flat on very low trade. DE fell farther below the 200 day SMA it broke Monday.


Stats: +115.97 points (+0.49%) to close at 25648.02

Stats: +87.66 points (+1.13%) to close at 7822.15
Volume: 1.946B (-6.44%)

Up Volume: 1.29B (-340M)
Down Volume: 684.41M (+253.23M)

A/D and Hi/Lo: Advancers led 1.48 to 1
Previous Session: Advancers led 2.66 to 1

New Highs: 83 (+24)
New Lows: 67 (-18)

Stats: +16.55 points (+0.58%) to close at 2850.96
NYSE Volume: 711.992M (-5.25%)

Up Volume: 400.491M (-182.344M)
Down Volume: 289.58M (+129.181M)

A/D and Hi/Lo: Advancers led 1.98 to 1
Previous Session: Advancers led 3.14 to 1

New Highs: 105 (+32)
New Lows: 62 (+7)


VIX: 16.44; -1.62
VXN: 19.92; -2.31
VXO: 17.65; -1.87

Put/Call Ratio (CBOE): 1.15; +0.13. 6 of 7 closes over 1.0. Definitely bounce material in itself.

Bulls and Bears:

Bears stopped the decline but did not bounce, holding 17.8 for a second week. Bears finally broke their semi-negativity and dropped the past few weeks. As noted, that was a negative indication for the rally as they had remained more bearish in a relative sense than bulls. The decline suggested a selloff and that occurred, more or less.

Bulls backed off a point after rising steadily. Just as they got within 5 points of that 60% range where the upside moves have stalled, bulls lost their nerve a bit.

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: 55.5 versus 56.4

Bears: 17.8 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.



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 inversion increases to 4BP.

The 2 year versus the 10 year: Spread holds at 21BP

10 year: 2.371% versus 2.414%

3 month: 2.409 versus 2.416%
2 year: 2.164% versus 2.199%

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: 1.12057 versus 1.12060

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: 109.547 versus 109.634

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: 62.02, +0.24

Gold: 1297.80, +1.50


Two relatively weak upside sessions -- despite some really big moves by individual names -- has SP500, NASDAQ and others at the 50 day MA and the March peak. We picked up some personal products-type positions as they are performing, but held off from other areas on the bounce.

If stocks weaken and start to roll over here then we will of course look at downside plays: the initial break lower, the relief move to resistance, and a new rollover likely takes stocks even lower than the recent lows.

That means looking at more downside plays after this bounce to resistance and closing upside positions that stall themselves.

This does not mean the move has to end, the probabilities just suggest it and you prepare for that, particularly given the distribution sessions preceding the drop and the low volume, narrow breadth recovery.

Have a great evening!

End part 1
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