Thursday, May 02, 2019

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

* * * *
5/2/2019 Investment House Daily
* * * *

Investment House Daily Subscribers:


Targets hit: None issued
Entry alerts: CSCO
Trailing stops: YETI
Stop alerts: CAT; LSCC

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:


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.


- Earnings season in full torrent, and stocks are gapping up, gapping down as the indices go nowhere.
- Investors still digesting Powell's comments in the context of earnings, economic data, trade.
- Indices continue to fail at resistance, looking a bit tired near term.
- Stocks gapping upside, stocks gapping downside, indices stagnant -- investors uncertain, the action shows it, a test is likely.

Earning season continues to roll stocks around like a bunch of loose canon on the deck. Stocks gap higher, stocks gap lower. Stocks gap higher then fail or they gap lower then rally back. Lots of indecision as the indices continue to trade around the prior highs or important resistance (and, of course, that can be both).

The result Thursday -- ahead of the jobs report and after the FOMC decision mind you -- was a split ticket. Large caps lost a bit of ground while the small and midcaps gained a bit of ground. SOX posted a 1.11% move, but even that had some taint from a fade from the session high that saw it give up 17 points -- the exact amount it closed higher.

SP500 -6.21, -0.21%
NASDAQ -12.87, -0.16%
DJ30 -122.35, -0.46%
SP400 0.21%
RUTX 0.40%
SOX 1.11%
NASDAQ 100 -0.36%

VOLUME: NYSE -4%, NASDAQ -3%. Good to see volume back off on indecision at resistance.

ADVANCE/DECLINE: NYSE -1.2:1, NASDAQ +1.1:1. As indecisive as the indices.

Still digesting what the Fed said.

When you see stocks jumping up and stocks selling down and the indices going nowhere, you get a sense there is no consensus on what is to happen next. With Powell's commentary clearly indicating there was no rate cut on the table, something the market was pricing in at the very least via the Fed Funds Futures contract, investors and traders were left to revisit the current and recent economic data, earnings results, trade talks, etc. to try and glean some direction. From the split decision, the inability to hold onto gains, the chasing of individual stocks back and forth, it is apparent that no consensus is yet decided.

Contrast that to the market 'falling forward' as I described it during the past few months. When in doubt the market bias moved higher.

I am not saying that bias is gone, but it is being questioned right now after earnings such as those shown by INTC, GOOG, MMM. Stalwart names being questioned -- and sold off hard.

Thus, the back and forth on earnings reports, the feast or famine with the indices on standby. Afterhours it is the same story with some top stocks up on earnings (ACIA, ANET, FTNT, PLNT), others moving higher (SHAK, DATA, MNST, MELI). After positive earnings early on, at least better than the 'earnings recession' forecast, pushed the indices higher, they have failed to push to higher highs as earnings continue to spew forth.

Not selling off, but also not moving up. That works for SOX as it works laterally after breaking to new highs to start April. It also is decent enough for NASDAQ 100 as it makes a pretty decent doji test of the prior high, fading slightly from the breakout.

The other indices, well, they have settled back in their ranges after trying at new highs or bumping at other resistance.


To view, click on the following links:

A bit tired?

Despite some really good individual moves on really good earnings results, the indices cannot make a break higher. As noted, they are also not selling off.

Through it all, however, the indices look a bit heavy, a bit tired. As I have said, five weeks up to this point and it is not surprising they need to take a break.

The question, as always, is what kind of break, or how big a break? Well, how some of the big names that were hammered on earnings respond over the next week may help tell that story. INTC has the look it is trying to find support, but has not done it yet. GOOG showed a doji today, but it is too early typically for it to show it is finding support. TSLA took a week to put in a little double bottom and is trying to bounce on word of raising money via a stock and bond offering -- go figure.

When the indices are a bit overbought or investors are a bit uncertain, you get this kind of disparate movement. You get stocks and indices struggling to hold a move. It takes a bit of time to work through this. Fortunately, there are plenty of good earnings to go with those that disappointed and the action is thus not becoming too one-sided. It will take some time to work through it.

That explains the back and forth action, the stocks jumping higher or dumping lower. The market is attempting to price in Powell, the economic data, trade, earnings -- all after the most recent leg higher that was five weeks long and took SP500 and NASDAQ to the old highs.

That also explains why we did not close QCOM even though it jumped higher on earnings -- and then gave most of the move back with a huge tombstone doji on top of that AAPL settlement related surge. Or ACAD for that matter -- it could not hold a move over the 50 day SMA even though it rallied. VMC may prove to be too strong, but it will have to show it Friday post jobs.

Oh yes, jobs Friday. ADP was big at 275K (170K expected), and if the government number is big just how will investors handle that? Good news that the economy, despite the Fed hikes and other issues, is still strong (at least by this lagging indicator)? Or will it get chippy and say 'well there goes any hope for a rate cut' and use it as a reason to, after failing to get through resistance after 5 upside weeks, actually sell back and reset for a run at the highs later on?

Could be a damned if you do, damned if you don't situation, the Kobayashi Maru no win scenario as stocks may simply be ready to test.

That is okay. Five weeks up to resistance and earnings to boot. Oh, and the FOMC pulling back on the rate cut string. Plenty of reason to take some profits and let things set back up.


With so much back and forth in individual stocks and the intraday failure to hold moves by the indices, we are inclined to let plays work that are holding a decent pattern or are still in a position to move the way we want. I am sure we will be taking more gain and closing more positions if upside plays cannot bounce off support. Some good patterns broke higher but are having trouble holding the move -- similar to the indices.

I hear Cramer last night was telling people to sell some stocks the day after he was telling them to buy them -- then getting lauded because he was able to change his mind. Well, that is why you take gains along the way, why you banked a lot of profits the past two weeks. Sure we still bought into new upside because the patterns are still very good. If they cannot hold the breaks then we close them, but we already have a lot of profit in the account

Even so, NFLX, ZS, FB, TWTR, WDAY, CRM, AMZN, COUP, LRCX, MTCH, NFE, TCBI, C, VMW, VRSN, JD, BABA, AAPL and others still look very good upside. How they react in their good patterns says a lot about how this market proceeds. The indices and stocks can test some more and these above can still sport very good patterns and make new breaks higher when the test is done.

Thus, we anticipate a test, let the leaders work as they still look solid, and be ready when the market renews the upside. It needs a bit of a test, but still has excellent leadership, a compliant Fed even if it is not ready to cut right this moment, tax cuts that are -- despite the commentary -- still working in the economy as they are long-term cuts, and plenty of money not in the market. Not too terrible a scenario.

While we likely do not do much Friday, preferring to let the back and forth action settle down, you cannot help but look at stocks such as BABA and company and anticipate the upside potential.

Have a great evening!


Stats: -122.35 points (-0.46%) to close at 26307.79

Stats: -12.87 points (-0.16%) to close at 8036.77
Volume: 2.21B (-2.64%)

Up Volume: 1.25B (+536.35M)
Down Volume: 930.31M (-609.69M)

A/D and Hi/Lo: Advancers led 1.05 to 1
Previous Session: Decliners led 2.15 to 1

New Highs: 67 (-54)
New Lows: 66 (+8)

Stats: -6.21 points (-0.21%) to close at 2917.52
NYSE Volume: 830.711M (-3.70%)

Up Volume: 336.368M (+150.714M)
Down Volume: 479.191M (-192.18M)

A/D and Hi/Lo: Decliners led 1.19 to 1
Previous Session: Decliners led 1.71 to 1

New Highs: 100 (-106)
New Lows: 58 (+21)


VIX: 14.42; -0.38
VXN: 17.62; -0.31
VXO: 14.16; +0.18
Put/Call Ratio (CBOE): 0.93; 0.00

Bulls and Bears:

The surprise is that bulls fell instead of rising as the indices continued higher. The bigger surprise is that bears fell a significant amount. Of the two, I would suggest the drop in bears -- very stubborn to fall -- is the bigger news and more an indication of the market turning to the more ebullient side.

At this juncture there are no extremes in this indicator. 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: green (all is well), but rising toward the 60's that would start to represent a threat (a yellow indicator).

Bulls: 53.4 versus 54.8

Bears: 18.4 versus 19.2

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: Yellow. No current inversion. One prior inversion of 3 month/10 year but it was just 2 days. Curve is flat at the short end but still upward sloping.

The 3 month yield versus the 10 year: Spread increase 4BP to 11BP

The 2 year versus the 10 year: Spread holds at 20BP

10 year: 2.547% versus 2.504%.

3 month: 2.437% versus 2.427%
2 year: 2.345% versus 2.306%

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: 1.11748 versus 1.12002. After testing the 50 day MA Wednesday intraday, the euro drops hard. Looks like another bounce that failed in the trend lower.

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: 111.421 versus 111.444. Still flat-lined over the 50 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: 61.81, -1.79. Wow, a solid drop to test the 200 day SMA and the 50 day MA's. Looking kind of toppish after failing to even try to hold the move to near 67.

Gold: 1272.00, -12.20. Gapped down from the 20 day EMA test. Bearish.

End part 1 of 2
Customer Support:
1153 Bergen Pkwy - Suite I #502 - Evergreen, CO 80439

No comments: