Thursday, May 16, 2019

The Daily, Part 1 of 2, 5-16-19

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5/16/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: ZS
Trailing stops: GOOG
Stop alerts: AVGO; GOOG

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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.

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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.


- Rebound now 3 days with some areas gaining strength, others growing weaker.
- NASDAQ, SP500 back over the 50 day MA, the other indices unimpressive.
- Software stronger, personal products stronger, AMZN and V stronger . . . but chips need to toughen up.
- AMAT afterhours earnings trying to help stretch the 3-day bounce farther.
- We played the upside, we played the downside -- is the market going to bifurcate? The chips may tell that tale.

A third day upside off the Monday gap lower took NASDAQ, NASDAQ 100 and SP500 back over the 50 day MA, filling the Monday gap lower. While breadth was somewhat improved on NYSE (2.3:1), NASDAQ remained tepid (1.5:1). Okay, not a groundswell of buying, but volume rallied on both exchanges, +4% NYSE, +11% NASDAQ. Big names on NASDAQ 100 were again purchased.

SP500 25.36, 0.89%
NASDAQ 75.90, 0.97%
DJ30 214.66, 0.84%
SP400 0.60%
RUTX 0.58%
SOX -1.68%
NASDAQ 100 1.02%

VOLUME: NYSE +4%, NASDAQ +11%. Finally, some rising volume on an upside session. That put volume back above average for NASDAQ, still disappointingly below average for NYSE.



To view, click on the following links:

Perhaps 3 upside days turns the tide back upside. NASDAQ and SP500 over the 50 day MA on better volume indicates more buying than the prior two sessions.

At the same time, however, DJ30 only made it to the 10 day EMA, still below the 50 day. SP400 tapped at the 50 day MA's on the high and faded some gains. RUTX climbed to the 50 day MA as well, moving through them only to give up that level on the close. Sure looks like a 1-2-3 bear flag for the small caps.

SOX was down as AAPL-related chip stocks were hammered on worries of a China trade attack on AAPL. Those chips -- SWKS, XLNX, QRVO -- looked gruesome.

Thus, there was the decent and the not very good. SP500 and NASDAQ provide upside promise, but the other indices are struggling at resistance, and SOX, the key market group in terms of market leadership, is unable to reengage.

Importantly, even outside the AAPL chip stocks, key names do not look great. AVGO gave up the 50 day EMA with a doji on rising, above average volume. Indeed, we exited the upside and moved into a downside position. Now, there may be some hope afterhours. AMAT produced some good results and jumped 2.5 points. It pulled other stocks with it at first, e.g. AMD, MU, but they have since faded. NVDA beat earnings expectations and initially fired higher, but in later trade it has given up just about all the afterhours surge.

As it stands, the move picked up strength it did not have the first two upside sessions Tuesday and Wednesday, but it was hardly blowout. The best index patterns are still problematic (SP500, NASDAQ) while the others are still bearish.

Leadership is definitely hot and cold.

Hot: Software, food, personal products, big tech, parts of FAANG (read AMZN, GOOG somewhat), V, PYPL, social.

Cold to Not: Some key chips, machinery, banks/brokerages, energy, AAPL, and more.


We bought some upside (ADBE, MSFT, VRSN), some downside (ARRY, AVGO, SWKS) as the patterns indicated. Software remains very solid and thus we were buying that upside. Chips are weaker, so they were logical downside plays along with the biotech ARRY that failed at the 50 day MA on volume.

After 3 days upside Friday could see a pause to end the week. Could; the past two sessions we said to watch for weakness to set back in but stocks found bids. That said, often rebound moves come in 3-day groups just as pullbacks often show that 1-2-3 action. Bad news also comes in three's they say. Just threw that in there.

Volume was up, breadth better, and strong leadership groups showed a lot of leadership power (software). Chips, a very important leadership group, had serious weakness in some key names. Without chips moving upside, gains are definitely harder to score. FAANG stocks received stronger bids this week, but are still somewhat problematic after the bounce. NFLX at the 50 day MA, GOOG there as well, fading off its intraday high. AMZN looks solid but AAPL shows that bear flag below the 200 day MA.

Obviously we do not have the utmost confidence in this move back up given the prior distribution, the breaks of support, the less than enthusiastic move back up. Nonetheless, you go with the market and what it shows.

The market showed definite weakness in some areas -- even on an upside session -- and we are playing into the weakness. The market also showed definite strength in some areas and we bought into that strength with more software. That is on top of the personal products and food positions taken earlier in the week.

If the market wants to bifurcate, that works as we can make money on those disparate moves. The issue keeps coming back to the chips and how they stepped back from leadership -- the chips are market direction indicators and they are heading both ways both before and after the close. AMAT is up nicely. NVDA jumped then fell back to flat. Others are trying to follow AMAT. We will see if they can pull it together after these earnings. The market upside needs the chips to get it back together.

Have a great evening!


Stats: +214.66 points (+0.84%) to close at 25862.68

Stats: +75.90 points (+0.97%) to close at 7898.05
Volume: 2.16B (+10.99%)

Up Volume: 1.32B (+30M)
Down Volume: 803.72M (+119.31M)

A/D and Hi/Lo: Advancers led 1.44 to 1
Previous Session: Advancers led 1.48 to 1

New Highs: 117 (+34)
New Lows: 74 (+7)

Stats: +25.36 points (+0.89%) to close at 2876.32
NYSE Volume: 743.348M (+4.40%)

Up Volume: 492.357M (+91.866M)
Down Volume: 234.378M (-55.202M)

A/D and Hi/Lo: Advancers led 2.25 to 1
Previous Session: Advancers led 1.98 to 1

New Highs: 176 (+71)
New Lows: 43 (-19)


VIX: 15.29; -1.15
VXN: 18.40; -1.52
VXO: 16.19; -1.46

Put/Call Ratio (CBOE): 1.02; -0.13. Seven of eight sessions over 1.0 is providing upside fuel.

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 decreases to 1BP.

The 2 year versus the 10 year: Spread falls 1BP to 20BP

10 year: 2.394% versus 2.371%

3 month: 2.401 versus 2.409
2 year: 2.194% versus 2.164%

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: 1.1174 versus 1.12057. Sharp break lower for the euro after failing at the 50 day MA with the Monday doji.

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: 109.879 versus 109.547. After a 3 week drop to the March lows, the dollar posted a pretty solid bounce.

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: 62.87, +0.85. Trying to make a bounce off the 200 day SMA.

Gold: 1286.20, -11.60. Dropped hard back through the 50 day MA it just took out Monday. Strength in stocks making gold less lustrous.

End part 1 of 2
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