Thursday, May 30, 2019

The Daily, Part 1 of 2, 5-30-19

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5/30/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: None issued
Entry alerts: DE; PCRX; SNAP; TNDM; ZM
Trailing stops: None issued
Stop alerts: PEP; TECD

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Market Summary Video, Plays and Play Videos, and Play Table with play annotations will issue Wednesday, Weekend.

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Tuesday and Thursday reports will contain the market summary, chart links to view the index charts, and updated play table.

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- 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.


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.



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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.


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.


Stats: +43.47 points (+0.17%) to close at 25169.88

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)

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)


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.



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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