Monday, June 03, 2019

The Daily, Part 1, 6-3-19

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6/3/2019 Investment House Daily
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Targets hit: QID
Entry alerts: CDNS; CMG; HIIQ
Trailing stops: COUP; ETN; FB; MTCH; VRSN
Stop alerts: ADBE; DOCU; MSFT; NFLX; TWTR; V

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- And we thought the Mexico tariffs were bad. Anti-trust actions against big tech names trumps all.
- AAPL, AMZN, GOOG (and you know FB is to come) said to be under anti-trust investigation.
- ISM falls to pre-election levels.
- While FAANG are pounded, many NYSE stocks perform fine, though the skew is toward slower growth companies.
- Oversold even farther, in position to bounce, but have to watch how NASDAQ, SP500 trade at the 200 day SMA.

Over the weekend I posited whether the tariffs on Mexico broke the market's back. If they did not, anti-trust investigations may seal the deal.

Anti-trust possibilities tore into large cap tech to start the week. At first it was GOOG with various outlets reporting the DOJ was prepping for opening an investigation. GOOG gapped down almost 70 points. Then AMZN was targeted with the FTC actually beginning an anti-trust probe. Cannot leave out AAPL; reports then surfaced the DOJ was likely to begin an investigation of AAPL. Kind of interesting given AAPL is selling $1K phones, not flooding the market with low-priced units to crowd out competition. No reports mentioned FB, but it was down 7.5%, dropping to the 200 day SMA, just for completeness.

Then afterhours it is reported Congress is getting in on the action with the Judiciary Committee issuing a press release that it is going to hold hearings covering three areas regarding these large tech and retail companies.

One can argue the companies such as GOOG and AMZN and likely FB to come brought it on themselves. Kudos to them for creating such successful products. But, they just had to push too far and get too greedy in capturing and selling and otherwise using customer data. They ruled the world in their sectors and they act like it as well. Knowing the regulator mindset, that is begging for the regulators to come after them.

ISM May printed at 52.1 versus 52.6 expected versus 52.8 April. That is the worst print since October 2016, just before the election. A more real time data point showing the Fed, if it is looking, that data is softening, confirming the distortion in the yield curve.

So, it was an awful day in stocks, right? Not really. SP500 was lower 0.28%, hardly measuring up to NASDAQ's -1.61%. DJ30, SP400, RUTX, SOX were all higher. Not a total crushing of stocks, just big tech and those that feed those big tech stocks.

SP500 -7.62, -0.28%
NASDAQ -120.13, -1.61%
DJ30 4.74, 0.02%
SP400 0.69%
RUTX 0.31%
SOX 0.33%
NASDAQ 100 -2.10%

VOLUME: NYSE +1%; NASDAQ +15%. NYSE volume holds well above average. NASDAQ volume jumps higher above average.

ADVANCE/DECLINE: NYSE +1.9:1, NASDAQ +1.1:1. Definitely a large cap NASDAQ event.

While big tech was bombed along with its drones, S&P stocks were quite solid with many higher. Semiconductors were up, though that might be an effect of Infineon buying CY. In any event, the news did not, as of yet, quell purchases across the market. Thus, some life remains but much of it is in the slower growth areas more typical of a bear market or less than bull market.

Thus, seeing stocks such as CLX, CL, KO rally is not that comforting the markets will continue higher. You can make money off them upside, but they are not screaming 'bull market ahead.'

And that is where the speculation comes in. Some are now saying the Fed will come to the rescue with a rate cut as early as this month. Others note that when Congress gets involved with hearings, that is usually the apex of the negativity and the bottom of the selling trough.

Could be, but even those are not absolute to the day of the comment. There is still room downside and SP500 likely gets sold to 2650 - many are looking at that.

Here is the rub: the market may try to bounce off this recent selling before SP500 sells to that level. Stocks looked ready to bounce last week when the Mexico tariffs were announced. After this kind of jerk lower it could bounce. Can't count on it with the high volume selling and we had to exit several positions, but the violent low can lead to a reflex move upside. After that, however, when everyone feels the pressure is off, it rolls back down.


Quite a negative sentiment session that saw NYSE indices positive or close thereto. They could post a relief bounce, particularly as they did not sell much in the face of that negativity.

NASDAQ and NASDAQ 100 dropped below the early March low, just over 7250. That is a somewhat roundish number where NASDAQ could attempt a bounce. 7000 looks much better for a serious bottom.

SP500 held near the March low, showing a candlestick doji. With the decent performance of most S&P stocks the 500 could bounce and try that 200 day SMA. Of course, overall the pattern remains bearish; any bounce is just an oversold relief move.

SOX held the same range just below the 200 day SMA and right at 1300 support, continuing the lateral move now 7 sessions old. That it held is good, that it could not make a serious break higher with the M&A (Infineon buying CY) shows there is still lethargy: AMD surged upside but could not hang onto the move.

DJ30 showed a doji on the session, just below 25,000. Good volume. Perhaps it is ready for an oversold move as well similar to SP500.

RUTX, SP400 both posted gains, market leading in SP400. A bit oversold, so perhaps a bit of upside here as well.


Semiconductors: Some look ready to bounce. AMAT, XLNX, SLAB, TXN - enough names to jump SOX off support at 1300.

Software: the dam broke. NOW, DATA, VMW, MSFT, HUBS, WDAY were all slammed.

Social: Slammed. FB on fears the DOJ will name it next. TWTR, MTCH sold hard. SNAP hung on but it did give up an early solid move higher.

Insurers: Bouncing up from a short pullback, e.g. ALL, TRV, MET.

Drugs/Biotech/Healthcare: Again, these stocks are still holding up well, waiting to see if they can break higher. ARNA, PTCT, BSX. Picked up some HIIQ, looking to grab some ARNA and others as they continue.

Food: Catching a bid again, e.g. KO, PEP, WING, MDLZ.


Stats: +4.74 points (+0.02%) to close at 24819.78

Stats: -120.13 points (-1.61%) to close at 7333.02
Volume: 2.67B (+14.59%)

Up Volume: 1.34B (+701.51M)
Down Volume: 1.31B (-360M)

A/D and Hi/Lo: Advancers led 1.11 to 1
Previous Session: Decliners led 2.86 to 1

New Highs: 58 (-6)
New Lows: 170 (-65)

Stats: -7.61 points (-0.28%) to close at 2744.45
NYSE Volume: 982.134M (+1.04%)

Up Volume: 720.866M (+472.196M)
Down Volume: 255.365M (-456.287M)

A/D and Hi/Lo: Advancers led 1.86 to 1
Previous Session: Decliners led 2.23 to 1

New Highs: 100 (+18)
New Lows: 113 (-139)


VIX: 18.86; +0.15
VXN: 24.22; +0.99
VXO: 20.64; -0.34

Put/Call Ratio (CBOE): 1.13; -0.06. 19 of 22 sessions over 1.0 on the close.

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.

Bulls surprisingly resilient, falling but not much. Bears actually rose. Still no extremes though bulls were close to the 60's that has marked tops. Apparently this was close enough for stock market work.

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: 49.0 versus 49.5 versus

Bears: 17.3 versus 17.2

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: 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 4BP to -26BP. Widest of this bout of inversion.

The 2 year versus the 10 year: Spread climbs 2BP to 23BP. Continues healing itself.

10 year: 2.078% versus 2.133. More fear, more reason for bonds to rally to a higher breakout high. Way overbought right now, but the negative news keeps hitting so people keep buying bonds.

3 month: 2.341% versus 2.354%
2 year: 1.844% versus 1.924%

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: 1.12446 versus 1.11685. Euro makes the expected breakout over the 50 day EMA, the largest close above that level since mid-March.

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: 108.00 versus 108.291. Dollar fades farther against the yen. About at the usual bounce point to test the falling 10 day EMA.

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: 52.25, -0.25. Oil showing a doji after getting pounded. Perhaps time to try an oversold bounce.

Gold: 1327.90, +16.80. Exploding higher for a second session. The late February high was 1349.90. Looks as if it will test that level.


Well, there was no oversold bounce Monday, but the action of the NYSE indices - in light of all the negative stories - could provide that starting Tuesday. Heck, even the big techs are down so hard they could bounce - FB is at the 200 day SMA and that is a pretty strong point to try a bounce. Things can get so bad they bounce.

Do you play it? With certain stocks. Food, rejuvenated personal products, some insurers that tested. On the relief bounce side, some chip stocks could be bouncing. Some FAANG such as FB as noted, even NFLX that undercut its range and the 200 day SMA and forced us to close the position but then managed to sneak back above the 200 day at the close. Heck, one fellow is saying that TSLA is so bad it is now a play for a bounce off lows hit in 2016. The same can be said for NVDA now at lows from November 2018 and January 2019.

Even with bounce possibilities, remember SP500 and NASDAQ are still just below the 200 day SMA and have to face that level on any rebound. They held it on the way down and thus it is a level they have to beat on any move higher. With this market and its chronic weakness and distribution selling, that is a tougher hill to climb. Fortunately, other stocks can make that move even if those indices struggle there.

Have a great evening!

end part 1
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